Microsoft May Design Its Own-Brand Smartphone with Windows Phone 8 - Analysts

Following Surface Tablets, Microsoft May Adopt Integrated Hardware-Software Model for Smartphones

by Anton Shilov
06/21/2012 | 04:50 PM

In a bid to ensure its success in the world of highly-integrated mobile devices, Microsoft will not only release its own media tablets this year, but will likely launch its own smartphones, according to unofficial information.


For thirty seven years of its existence Microsoft Corp. focused purely on software, leaving computers to its partners to enable broad choice of devices. By contrast, Apple's success strategy was an integrated hardware-software approach that ensures consistent experience. With the release of own-brand Surface tablets this week, Microsoft made a clear move towards Apple's strategy. Moreover, it may release own-brand smartphones, some Wall Street analysts believe.

"Our industry sources tell us that Microsoft may be working with a contract manufacturer to develop their own handset for Windows Phone 8. It is unclear to us whether this would be a reference platform or whether this may be a go-to market Microsoft-branded handset," wrote Rick Sherlund, an analyst with Nomura, in a note to clients, reports Reuters news-agency.

With Windows 7 and Windows 7.5 the software giant placed a big bet on consistency of experience on different devices from various makers; besides, it hoped that with the support from Nokia Corp. it will be able to boost its presence on the market of smartphones. For many reasons, that strategy has failed and it is clear that sales of all WP 7.5 handsets will drop sharply as they are not Windows Phone 8-compatible.

The next generation operating system for smartphones - Windows Phone 8 - shifts some of Microsoft's strategies in a big way. The number of hardware partners is now pretty limited: Nokia, Huawei, Samsung and HTC;  of them, only Nokia will put significant efforts into promotion of Windows Phone 8 as the success of the platform is crucial for its survival. Nonetheless, for device makers the most important thing is to differentiate themselves and provide solutions for their customers. While that approach worked well for personal computers and Windows operating system, it looks like Microsoft does not see it necessarily the best one when it comes for tablets and, perhaps, smartphones.

"I see Surface tablet as a stalking horse for Surface phone. When Microsoft and Nokia struck their bargain two years ago, no one including Redmond brass knew how bad things would get for Nokia. Maybe Bill Gates has been staying up late reading the Isaacson's [Steve Job's] biography, but Microsoft now seems ready to adopt the integrated hardware/software approach in its tablet. [...] If Nokia starts losing the ability to market the Windows Mobile Phone, then Microsoft will have squandered its chance to get Windows Mobile as a major mobility OS platform for about the ninth time. I do not think Ballmer/Gates will let this happen, the stakes are too high this time," said Jim Kelleher, an analyst with Argus Research, in a research note, reports Tech Trader Daily.

Microsoft does know all the advantages and disadvantages of the integrated hardware-software platform thanks to Xbox 360, which is one of the pearls of the company's businesses thanks to numerous sophisticated multimedia services. On the other hand, the world's largest software maker did not see any success with its Zune portable media players. What should be clear is that it is impossible to sell billions of people similar devices from one brand, no company has ever done this. Therefore, to replicate the success of Windows on mobile devices and create an extremely strong infrastructure, Microsoft does need hardware partners who will create numerous different product lines for particular software.

On the other hand, in a bid to set up a benchmark for user experience and quality of Windows devices, Microsoft may release a line of own-brand gadgets for those looking for consistent premium experience. This product family will barely compete against companies like HP or Lenovo, but will clearly show both end-users and manufacturers the way Windows devices should be made. At the end of the day, with the acquisition of Motorola Mobility, Google is now in the hardware business as well.