New Gadget 2011

(Reuters) - Nokia has stopped developing its first smartphone using the MeeGo operating system, two industry sources close to the company said.

In a leaked internal memo, Chief Executive Stephen Elop wrote: "We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market."

A spokesman for Nokia declined to comment.

MeeGo, seen key to Nokia's battle in the high-end smartphone market, was created last year by the merger of Nokia and Intel's Linux-based platforms Maemo and Moblin.

Nokia, the largest handset maker by volume, has seen industry newcomers Apple and Google sweep up most of the profits in the wireless industry.

Chairman Jorma Ollila brought in Elop from Microsoft last September. Elop will unveil on Friday his strategy for turning Nokia around.

Elop posted a memo on Nokia's internal website this week, comparing its position to a man on a burning oil platform, wondering whether he dares to jump.

Investors are betting on a change of strategy, picking up call options on Nokia ahead of an investor event on Friday, said Nick Tranter, head of derivatives at Espirito Santo.

Shares in Nokia rose 1.4 percent on Wednesday as hopes for a change in its strategy.

Analysts said Nokia could still show off the next MeeGo device, even if unfinished, at its investor day in London on Friday, or a news conference in Barcelona on Sunday.

"Frankly, Nokia has to decide whether maintaining MeeGo is of strategic value in the short or longer term. If it believes MeeGo will not deliver value, it should divert resources elsewhere," said Canalys analyst Tim Shepherd.

"One good thing about Stephen Elop is that he is not emotionally attached to any platform."

(Reporting by Tarmo Virki; Editing by Greg Mahlich and David Hulmes)