[Follow-up: Report: Microsoft is not making its own Windows Phone]

Earlier this week, Microsoft jumped into the computer hardware business, announcing plans to make its own Surface tablet computer.

Now, following the unveiling of Windows Phone 8 yesterday, a longtime Wall Street analyst says Microsoft could be laying the groundwork to make a similar move with Windows Phone.

In a note to clients this morning about the latest Windows Phone changes, analyst Rick Sherlund of Nomura Capital writes, “Separately, our industry sources tell us that Microsoft may be working with a contract manufacturer to develop their own handset for Windows Phone 8.”

He continues, “It is unclear to us whether this would be a reference platform or whether this may be a go-to market Microsoft branded handset. We would not be surprised if Microsoft were to decide to bring their own handset to market next year given that Microsoft has decided to bring to market their own Windows 8 ‘Surface’ tablet/PC products.”

We’ve asked Microsoft if it wants to comment. Sherlund has covered the company since it went public, previously as an analyst for Goldman Sachs, and he has a knack for picking up on clues about the company’s strategic moves.

So far, at least, Microsoft has used the same strategy in the phone business as it has in the computer business, focusing on the operating system and leaving the hardware to a variety of partners.

There is one huge difference between Microsoft’s position in the mobile phone market and in personal computers, and that’s market share. Microsoft is in a position to risk stepping on the toes of its hardware vendors with the Surface tablet because Windows is still the accepted standard for many businesses and consumers.

But Windows Phone is in a very different position, as a major underdog to iOS and Android, and Microsoft needs all the support it can get from handset makers to make a dent in the market.

So file this under speculation for now, but with Microsoft these days, you never know.

Update: Microsoft issued this statement in response to our inquiry. “We are big believers in our hardware partners and together we’re focused on bringing Windows Phone 8 to market this year.”

Like what you're reading? Subscribe to GeekWire's free newsletters to catch every headline


  • guest

    I think the logic is exactly the reverse. In PCs it’s completely optional for MS to get involved building hardware. They’re not particularly good at it. It makes a lot of OEMs mad. And it really looks like a sign of desperation, which it is because the OEM model is breaking down. In phones otoh, they basically have one OEM, Nokia, and it’s still unclear whether that partner is capable of turning things around. If they fail, MS has no real presence at all. So building its own phone is about the only way for MS to hedge an eventual Nokia failure. And the only OEM who might be upset is Nokia, who isn’t in a great position to do much about it.
    I think MS is now so far behind in phones that an eventual purchase of Nokia is inevitable. Reports say they already looked at it last year and the numbers didn’t make sense. But with more layoffs at Nokia, further declines in its market cap, or more signs of a turnaround, those numbers could look more attractive.

  • guest

    The role reversal under Ballmer is now complete:
    2000: MS is still the most dominant and valuable technology company, with high share, margins, and about 95% of industry profits. Apple is a low margin hardware player with less than 5% share.
    2012: Apple is now the most dominant and valuable technology company, with high share in the markets of the future (mobile, tablets), high margins, and about >80% of industry profits relative to PC, tablet, and smartphone hardware makers. And with this news, MS appears to be intent on becoming a less than 5% player in the low margin hardware business of tablets and maybe smartphones.
    I love our strategy. The board loves our strategy.
    – Steve Ballmer

  • Guest

    This is great news! In addition to owning 95% of the home computer market, 60% of the mobile phone market (Android + Windows Phone), being the dominant home video game console maker, and being the software choice of 99% of the Fortune 500, Microsoft is expanding its empire to encompass own-brand products. This is a rare case of a company having its cake and eating it too.

    I love that strategy. The board loves that strategy.

  • Jim

    Is the partnership with Nokia that busted that MS has to make its own phone? How much more committed to the platform and Windows Phone success could Nokia be? If MS is going down this path, something is seriously wrong.

  • http://www.facebook.com/people/Jon-Nehring/100001928079717 Jon Nehring

    WIth tablets I can see them bettering OEM offerings. The new Surface is impressive. With phones, Nokia is doing fine in the design and build department.

  • Guest

    Between the Surface announcement, the “can’t upgrade current WP phones” announcement, and now these rumors, it sounds like someone had on their commitments “poison and destroy all OEM relationships” and just got under the wire to claim this on their annual review.

    Great job!

Job Listings on GeekWork