Microsoft “planning own-brand smartphones”

Microsoft is considering making its own smartphone to kickstart sales of its Windows Phone software, according to a Wall Street analyst who has followed the company for many years.

The speculation – unconfirmed by Microsoft – comes after the company unveiled its latest Windows Phone 8 software, and the same week it announced an own-brand tablet.

“Our industry sources tell us that Microsoft may be working with a contract manufacturer to develop its own handset for Windows Phone 8,” wrote Nomura analyst Rick Sherlund in a note to clients.

“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 Sherlund, who covered the company for Goldman Sachs when the bank brought Microsoft public in 1986.

Microsoft wouldn’t confirm or deny the speculation. A spokesman said the company was a “big believer in our hardware partners and together we’re focused on bringing Windows Phone 8 to market this year”.

Microsoft can’t afford not to have phones sell. They have to find a way of selling it

Windows Phone 8 is the latest version of Microsoft’s mobile software, set for release in autumn. So far, the software giant has struggled to make a mark, with Windows-powered smartphones taking only 2% of a worldwide market dominated by Apple’s iPhone and devices running Google Android system.

Echoes of Surface

Microsoft charted a new course this week by announcing two own-branded tablet PCs, although doubts remain whether that was a move to invigorate hardware makers or a genuine attempt to compete with its partners.

A similar move in phones could make sense, and the company has little to lose by trying its own handset, said another analyst, considering the strategic importance of smartphones and poor sales of Windows phones.

“Microsoft can’t afford not to have phones sell. It has to find a way of selling it,” said Sid Parakh, an analyst at fund firm McAdams Wright Ragen. “It’s a significant piece of its long-term vision of integrated devices.”

If Microsoft did make its own phone, it would be a blow for struggling Finnish handset maker Nokia, which pledged to use Windows software in its smartphones under a multi-billion dollar pact last year. If Microsoft wanted to be in the handset business, it might even consider buying Nokia, suggested Parakh, although he said that was unlikely.

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