Nokia X2 Android-powered smartphone by Microsoft. Microsoft

The newly announced Nokia X2 Android-powered smartphone developed by Microsoft (NASDAQ:MSFT) might seem like the software giant's attempt to back away from its own Windows phone system - but don't think of it that way.

While the Nokia X2 will be available globally starting in July at a budget-friendly €99 ($135), Microsoft has plans to continue its Windows Phone line in 2014. In February at the World Mobile Congress, the company confirmed plans to collaborate with smartphone manufacturer LG on a device currently rumored as the LG Uni8, which would run Windows 8.1 and would be Microsoft’s first Windows Phone in almost three years.

Microsoft says several smartphone manufacturers including Huawei Technology Co. (SHE:002502), Lenovo Group (HKG: 0992), Samsung Electronics Co. (KRX: 005930), ZTE Corporation (SHE: 000063) and HTC Corp. (TPE: 2498) will also be developing hardware to support Windows 8.1 in 2014. During WMC, Joe Belfiore, a Microsoft vice president and manager for Windows Phone program management, detailed that the coming Windows Phone 8.1 devices will feature Qualcomm Snapdragon 200, 400, and 400 LTE chipsets, which means they'll target a midrange to low-end market. The devices will include 512MB of RAM and 4GB of internal storage with microSD support and dual-SIM support.

But there are also rumors about a flagship Windows Phone 8.1 called the HTC W8, which is expected to be exclusive to Verizon Communications (NYSE: VZ). Such a device probably would feature a more powerful chipset and higher storage capacities than Belfiore described.

While Microsoft’s long-term intentions with its own Windows Phone operating system and the Android operating system remain uncertain, the company has shown that the Nokia X2 is a collaborative effort as users will be able to access applications from several platforms on the device.

The Nokia X2 is the successor of the Nokia X Android smartphone that was released in February as the first Windows device to run the Android operating system by Google (NASDAQ:GOOG). With the X2, Microsoft aims to introduce updated hardware to its open-source version of Android, which includes a host of Windows-specific applications such as Outlook, Bing and Nokia Maps instead of Google services such as Gmail, Google search and Google maps. Nokia has also developed its own app store to be used instead of Google’s Play Store, but users will be able to run Android apps on the X2 and will also be able to access third party app stores.

Hardware specifications on the Nokia X2 include a 4.3-inch display, a 1.2GHz dual-core Qualcomm Snapdragon processor, 1GB of RAM and a 5-megapixel camera.

Hoping to entice customers with its cloud-based applications and services, Microsoft is offering 15GB storage on OneDrive with the Nokia X2.

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