I've argued a number of times in the past that had Nokia from the beginning embraced Android it wouldn't have had to sell to Microsoft. It turns out that Nokia had/has developed an Android handset, apparently code-named Normandy. It uses a customized or "forked" version of Android much like what Amazon has done with Kindle devices, taking them out of the realm of Google standards and control.
Reportedly it's a low-end device designed for emerging markets, where Nokia has had some success with its pseudo-smartphone Asha devices. Other details are scarce.
Microsoft bought Nokia's hardware business (for $7.2 billion) for multiple reasons. One of them was clearly defensive; it wasn't only about "bringing hardware and software together."
Nokia sells most (80% or more) of the Windows Phones on the market today. The continuing strength of the Nokia brand in Europe is responsible for Windows Phone's roughly 10% market share there now. Had Nokia embraced or "diversified" its lineup with Android devices Microsoft might have felt the potentially negative sales impact as Nokia split its focus and marketing.
The conventional wisdom is that Microsoft will kill the Normandy device when the acquisition formally closes -- it has been approved by regulators. Some are making the argument, however, that Microsoft might not immediately terminate the project because the version of Android being used is outside Google's control.
That remains to be seen. Yet the existence of Normandy lends further credibility to the theory that Microsoft bought Nokia's phone business to prevent it from turning to Android.