Finnish phone maker Nokia has stopped development of its Meltemi software platform, which it hoped would eventually compete directly against Android on mid-range handsets, according to three sources with direct knowledge of the company's plans speaking with Reuters.

The project leaked in September 2011, when CEO Stephen Elop said "in mobile phones - it's very much about 'Sonic,' it's very much about full touch activity that's going on, it's about the work we have to do around Series 40 to ensure it continues to help us in the future [...] It's the 'Clipper' program and the underlying 'Meltemi' software effort.'

Since then, however, the Meltemi project has never been confirmed publicly. One of the sources, who works for a supplier, said that the first feature handsets running the new OS should have already hit the market this year. The company aimed to use the Linux-based OS to replace its aging Series 40 platform in more feature-advanced handsets, but it was given the axe as part of the company's massive cost-cutting measures.

The move places Nokia in a precarious position, and at risk of losing further ground in the phone market, especially with the mixed success following its decision to use Windows Phone as its primary mobile OS. Despite favorable reviews, the Lumia handsets have struggled to compete against established platforms such as Android and iOS. Revelations such as the recent news that its flagship Lumia 900 will not get the upgrade to WP8 later this year has done little to help, despite being launched just a few short months ago.

This is just the latest of several other cost-cutting measures as part of CEO Elop's aim to cut spiraling costs at the troubled company. Last week Nokia posted a $1.7 billion operating loss for its last quarter, following on from an announcement in June that it was to cut 10,000 jobs by the end of next year.