Microsoft May Build Own Windows Phone 8

Microsoft has had a big week. On Monday, it revealed the Surface tablet, a Windows 8 device that the company will manufacture itself. On Wednesday, Microsoft showed off the core features of Windows Phone 8, a significant leap forward for the platform that should boost its appeal to consumers, businesses, and developers alike. Both announcements enjoyed a warm welcome and demonstrated that Microsoft clearly has a long-term strategy in play that will coalesce in the coming months.

Microsoft has already shown off tablets running Windows 8. It did that back in February, when it first revealed Windows 8. What makes the Surface different is that Microsoft--traditionally a software company--will step into the device-making business in order to help make the Surface a success. The strategy could pay off, but could also fail miserably. By making its own tablet, Microsoft will put itself in direct competition with the hardware partners it relies on to sell Windows machines.

The Surface could be the exception that works. It is clearly a direct shot at Apple's iPad, and shows that Microsoft is serious about stealing market share back from the market-leading product.

[ How does Windows Phone 8 fit Microsoft's big strategy? Read Windows Phone 8: Ready For Business? ]

It appears that Microsoft may be ready to do the same thing with Windows Phone 8.

Nomura analyst Rick Sherlund believes that Microsoft is developing its own smartphone hardware. "Separately, our industry sources tell us that Microsoft may be working with a contract manufacturer to develop their own handset for Windows Phone 8," said Sherlund in a note to clients on Thursday. "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.

Manufacturing its own smartphone has the same inherent risk that manufacturing its own tablet does: Microsoft could tick off its existing handset OEM partners.

During the presentation on Wednesday, several smartphone makers committed to delivering Windows Phone 8 devices this year. Those hardware OEMs include Nokia, HTC, Huawei, and Samsung. The devices will all run on Snapdragon S4 chips from Qualcomm. Notably absent from this list are Dell and LG, two of the original OEMs that launched Windows Phone 7 with Microsoft in late 2010.

Microsoft's track record with cell phone hardware is about as miserable as it gets. In 2009, it launched the ill-fated Kin series of half-smart, half-feature phones with Verizon Wireless. The devices ran a Microsoft-contrived operating system on Microsoft-designed hardware. They were soundly bashed by the tech press and Verizon stopped selling them after just two months. The Kin were a resounding market failure.

Surely a disaster such as the Kin would give Microsoft pause before pursuing a hardware strategy again. Is Windows Phone 8 the right platform for it to make a comeback? It's possible.

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