Nokia has been building its own Android phone according to multiple sources familiar with the company's plans. Codenamed Normandy, and known internally at Nokia under a number of other names, the handset is designed as the next step in low-end phones from the Finnish smartphone maker. We understand that Nokia has been testing "Normandy" with a special "forked" variant of Android that's not aligned with Google's own version, akin to what Amazon does with its Kindle Fire line.
The release of this phone is slated for 2014, and is supposedly "full steam ahead". I guess this will depend on how quickly Microsoft can complete the acquisition.
Unfounded speculation on my end: could this be the reason Microsoft went ahead and bought Nokia's devices division? A successful Nokia Android phone would be quite embarrassing for them, after all.