Nokia S40 replacement OS will be Linux based and called Meltemi.
Nokia and Symbian relation is not going so well as they continue to loose market share against Androids. Nokia already made a deal with Microsoft for Windows Phone 7 for its high end phones but its mid range and low end phones still use the obsolete Symbian platform which is struggling to stay competitive.
Moreover with the recent closure of MeeGo project, it looks like Nokia’s high-end handsets will exclusively feature WP7 in future. But Nokia’s main strength is not the smartphone market, but the low end phones. It is still the biggest market holder in third world countries. Accordingly, Nokia has already started to look at future for that market segment; as even the third world dwellers want cheap phones but with Android and iPhone like interfaces. Nokia has tipped that they are developing a new Linux based OS called Meltemi that would be their replacement for Symbian S40 based phones. The new OS will be made to run on low end hardware and offer modern features that people want these days.
Also keep in mind that Microsoft has their own plans to release a low end variation of WP7 called Tango. If Nokia shifts solely to Microsoft OS then they will save a lot of money on internal developments and OS fragmentations, but problem is that Tango may not scale down to level of very low end S40 phones. For now there is no confirmed news when WP Tango or Meltemi will show their features, capabilities and more importantly their requirements.