A potential smartphone from Microsoft has been a topic of discussion for years, and a new report that the Redmond, Wash.-based software giant is testing one with suppliers in Asia is fueling talk again.
Unnamed company officials blabbed the news to the Wall Street Journal and told the paper that it was too early to tell if the device would be mass-produced.
Microsoft just released its first tablet PC – the Surface – last month. A number of new smartphones from various manufacturers featuring the Windows Phone 8 operating system are expected to hit the market in the next couple of months, but Microsoft has never unveiled a handset of its own. Might that be about to change? Not anytime soon, at least according to one industry insider.
“With Microsoft selling its own tablet, many analysts believe that a smartphone can’t be far behind," noted Yankee Group research VP Carl Howe. "However, I think Microsoft will delay making that decision until it can weigh data from its Surface tablet sales against those of its hardware partners."
Howe believes MSFT will scrap the smartphone idea if sales of the Surface are poor, simply because it's unlikely a phone would fare any better than the tablet. Another negative would be if Surface sales are good but competitors do poorly, meaning "Microsoft would be trading be trading high-margin licensing dollars for its own low-margin hardware sales. Again, this would argue that a Microsoft smartphone would actually reduce Microsoft’s income, and therefore wouldn’t be a good move," the analyst said.
The pro-smartphone scenario, as Howe describes it, would be if Surface sales are good and if competing hardware manufacturer licensing revenue goes up. " ... then that suggests Microsoft could make money building and selling its own phone without harming its larger licensing business," Howe said. "However, Microsoft would have to then build strong wholesale relationships with the hundreds of mobile carriers around the globe to carry its products. Only after this point would Microsoft’s phone business take off."
The odds, therefore, are against a Microsoft smartphone, Howe says.