Senior VP Kevin Shields introduced the Lumia 920, saying it and the Windows Phone 8 software have been developed side-by-side for an experience that adapts itself to the user's lifestyle rather than the other way around.

The new flagship Lumia will be available in three new colours: yellow, lipstick red, and slate grey, as well as black and white, he said. The lower-priced Lumia 820 will come in those and also cyan and purple.

Shields said the phone will feature a virtually scratch-proof, crack-proof surface and "the fastest LCD display ever shipped on a smartphone."

"Frostbite in Finland"

The phone can also use wireless chargers including a Fatboy pillow, headphones and a JBL Bluetooth "boom-box" audio dock, Shields explained.

The phone is compatible with the emerging Qi standard for wireless charging, so it can be charged by third-party devices.

He added that thanks to the new Lumia Super Sensitive Touch technology, the phone can be used even when wearing gloves or mittens, saying that "if you live in Finland, you might lose a hand to frostbite if you take them off!"

"There are more people needing to use their phone with gloves on than you might think," commented leading mobile-devices analyst Carolina Milanesi, Research VP at the US firm Gartner, via Twitter.

However investors seemed unimpressed with the first hour of the Nokia event, with the company's share price plunging by just over 13 percent by the time the Finnish exchange closed.

In New York, NOK was down by nearly 15 percent in afternoon trading.

The phones are to go on sale in the fourth quarter of this year, but no shipping dates or prices were announced.

Ballmer predicts app explosion

Just over an hour into the launch event, Nokia CEO Stephen Elop introduced his former boss, Microsoft CEO Steve Ballmer. After an affectionate hug and photo op holding the new phones, Ballmer praised the "powerful partnership" between the two companies that has developed over the past 18 months.

Ballmer predicted that within a year there will be "close to 400 million new devices" running Microsoft operating systems, and that this will spur an explosion of new apps.

"The next app developer to hit it really big will be a developer on Windows," he asserted.

The Microsoft chief praised "the phenomenal work that Nokia has done" in developing the 920, and said he looked forward to using its upgraded video camera to film his sons playing football night games this weekend.

Augment your reality

The phone's PureView camera will feature advanced lens technology from Carl Zeiss optics that will automatically limit photo blurriness. Nokia Maps will also include augmented-reality software known as City Lens that overlays information about commercial establishments when the lens is pointed at a city street.

"It's definitely a step in the right direction," said Ramon Llamas of the research firm IDC. "They are addressing some of the pain points for smartphone users like blurry and shaky pictures."

But Llamas said it will be a tough market in the fourth quarter with Apple expected to launch a new iPhone, and others also introducing new devices.

"Lumia is not the only thing out there," he said. "Some of the innovation they have is awesome but if they can't get the message out properly it's going to be novelty ware."

The smaller Lumia 820 will reportedly include a more modest camera and less memory space.

Elop closed by calling Lumia "the world's most innovative smartphone", adding that "it's time to switch to Lumia."