Sendo, Britain's only mobile phone manufacturer, has dumped Microsoft as software provider for its main product - a web-enabled multimedia handset - just days before it was due to launch.

Sendo was a key partner in Microsoft's so-called Smartphone programme, and even sold a small equity stake to the software firm, but their jointly-devised Z100 handset will now be ditched.

The decision came at the eleventh hour: Sendo had already signed up Z100 customers, and even sent out samples to the trade press.

Sendo has now switched to Nokia's Series 60 technology, a rival system in what is proving to be an increasingly competitive market.

The move comes as a severe blow to Microsoft's Smartphone ambitions, which now rest on slender foundations.

Late last month, French-owned operator Orange launched what it claimed was the world's first - and still only - Smartphone service.

Two-way fight

Sendo chief executive Hugh Brogan said one reason for the switch was that Sendo could get access to the source codes for Nokia software, and therefore customise products.

With Microsoft - famously secretive about its intellectual property - it could not do the same.

This advantage has given Nokia the edge in this specialised market, where it controls about 60% of sales.

In addition to Sendo, Nokia now has Matsushita, Siemens, Samsung and its own handset manufacturing arm as clients; Microsoft, meanwhile, has partnered with Mitsubishi and Samsung.

Nokia has already shipped more than one million Series 60-enabled handsets, and aims for 10 million shipments next year.

"Just wait for Microsoft to ship its first million Smartphones," said Niklas Savander, Nokia's general manager for mobile Internet applications. "The grass will be green again by then."

Plans on hold

Sendo is a little-known firm which manufactures handsets for mobile operators such as Virgin; these are then sold branded under the network operator's name.

The firm sells to operators cheaply, and makes its money largely by manufacturing in a highly efficient manner.

It is not yet clear what the ramifications of the decision will be: Microsoft owns a stake of just under 5% in Sendo, and could possibly cause trouble.

The Z100 was to be Sendo's most sophisticated product by far, offering PC-style capability and multimedia functions in a reasonably compact phone.

Sendo had pinned great hopes on the Z100, and it will now be many months before it can develop and launch a Nokia-enabled alternative.