Nokia revealed its first smartphones to run the next version of Windows on Wednesday, a big step for a company that has bet its future on an alliance with Microsoft.

Nokia's new flagship phone is the Lumia 920, which runs Windows Phone 8.

Among the notable features on the new phone is a camera lens that shifts to compensate for shaky hands, resulting in sharper images in low light and smoother video capture, Nokia said.

The new phones can also be charged without being plugged in; the user just places the handset on a wireless charging pod.

Nokia also unveiled a cheaper, mid-range phone, the Lumia 820. It doesn't have the special camera lenses, but it sports exchangeable backs so you can switch colours.

Nokia shifts focus to U.S. market

The Finnish company revealed the new phones at a joint event with Microsoft in New York. The American market is a trendsetter, but Nokia Corp. has been nearly absent from it in the past few years. One of CEO Stephen Elop's goals is to recapture the attention of U.S. shoppers.

The Nokia Lumia 920 can charge wirelessly and has a camera lens that shifts to compensate for shaky hands, producing sharper images and smoother videos. (Mark Lennihan/Associated Press)

Facing stiff competition from Apple's iPhone and devices running on Google's Android software, Nokia has tried to stem the decline in smartphone sales in part through a partnership with Microsoft Corp. announced last year. It has moved away from the Symbian operating platform and has embraced Microsoft's Windows Phone software.

Nokia launched its first Windows phones late last year under the Lumia brand, as the first fruits of Elop's alliance with Microsoft. Those ran Windows Phone 7 software, which is effectively being orphaned in the new version.

The older phones can't be upgraded, nor can they run applications written for Windows Phone 8.

Nokia sold four million Lumia phones in the second quarter of the 2012 fiscal year, a far cry from the 26 million iPhones that Apple Inc. sold during those three months. So far, the line hasn't helped Nokia halt its sales decline: its global market share shrunk from the peak of 40 per cent in 2008 to 29 per cent in 2011, and it is expected to dwindle further this year.

Mum on price, sell date

Elop said the new phones will go on sale in the fourth quarter in "select markets." He didn't say what they would cost or which U.S. carriers would have them. AT&T Inc. and T-Mobile USA have been selling the earlier Lumia phones.

Investors weren't impressed. Nokia's stock fell 27 cents, or 9.6 per cent, to $2.56 US in midday trading on the NASDAQ Wednesday. It had dropped to as low as $2.41 after the announcement. The share price of Microsoft, which is based in Redmond, Wash., was unchanged at $30.39.

For Microsoft, the alliance with Nokia is its best chance to get into smartphones again, where it has been marginalized by the rise of the iPhone and then phones running Google Inc.'s Android software. The launch of Windows Phone 8 coincides roughly with the launch of Windows 8 for PCs and tablets. That launch is set for Oct. 26.

"Make no mistake about it — this is a year for Windows," said Microsoft Steve Ballmer, who joined Elop, a former Microsoft executive, on stage.

Legal battles could slow Android sales

The new Windows phones come as Google and makers of Android phones have run into legal trouble, which could slow the momentum of Android devices. A jury in Silicon Valley ruled two weeks ago that some Samsung Android phones infringed on Apple patents. The jury ordered Samsung to pay Apple $1.05 billion, and Apple is seeking a ban in the U.S. on some Samsung devices.

U.S. phone companies are also eager to build up Windows Phone as an alternative to the iPhone and Android, to reduce the leverage Apple and Google have over them. Android and Apple devices dominate in smartphones, with 85 per cent of the worldwide market combined, according to IDC.

Samsung Electronics Co., which has succeeded Nokia as the world's largest maker of phones, showed off a Windows 8 phone last week. It didn't announce an availability date either.

At Wednesday's event, Nokia executive Kevin Shields demonstrated the wireless charging technology by placing the phone on top of a JBL music docking station, which charged it.

Wireless charging has shown up in other phones, most notably the Palm Pre of 2009. But Nokia is making its phone compatible with an emerging standard for wireless charging, called Qi. That means the phone can be charged by third-party devices.

The docking station also played music from the phone, even though it wasn't plugged in. The music was transferred from the Lumia's near-field communications chip, which can connect automatically to other devices at short range.

Coupled with the right apps, NFC chips can also be used to pay for things in stores, by tapping the phone to credit-card terminals.