Bloomberg News

Microsoft May Be Working on Phone: Sherlund

June 21, 2012

Microsoft May Be Working on Own Phone

Touch panel screens for smartphones are displayed at the Finetech Japan exhibition in Tokyo, Japan, April 11, 2012. Rumor has it Microsoft will be developing their own phone. Photographer: Tomohiro Ohsumi/Bloomberg

Microsoft Corp. (MSFT:US) may be developing its own Windows Phone handsets, departing from its current practice of working only with partners like Nokia Oyj, according to Rick Sherlund, an analyst at Nomura Holdings Inc.

The company may be collaborating with a contract manufacturer to build a phone, Sherlund wrote in a note today, citing industry sources. Sherlund, who recommends buying the shares, said he wasn’t sure if the device would be a reference design for other companies to use as an example for Windows Phone products, or a Microsoft-branded phone for consumers.

Microsoft, the largest software maker, said yesterday that smartphones with the new Windows Phone 8 program will go on sale in the fall from Nokia, Huawei Technologies Co., HTC Corp. and Samsung Electronics Co. The company didn’t mention plans for its own phone. Microsoft needs to boost its share of the phone- software market, which was 2.2 percent in the first quarter, according to IDC, lagging behind Apple Inc. and Google Inc.

“We would not be surprised if MSFT were to decide to bring their own handset to market next year given that MSFT has decided to bring to market their own Windows 8 tablet/PC products,” Sherlund wrote, using Microsoft’s stock ticker.

Redmond, Washington-based Microsoft fell 2.6 percent to $30.14 at the close in New York. The shares have gained 22 percent in the past year.

“We are big believers in our hardware partners and together we’re focused on bringing Windows Phone 8 to the market with them this year,” said Stacy Drake, a director in the Windows Phone group, in an e-mailed statement.

Surface Tablet

Google’s Android was the smartphone market leader in the first quarter, with a 59 percent share, and Apple followed with 23 percent, IDC said.

On June 18, Microsoft said it will sell its own branded tablet computer, called Surface, reversing its long-standing strategy of relying exclusively on hardware partners in the computer market.

Microsoft last released a handset, the Kin, in 2010. The device, targeted at teens and social-media enthusiasts, sold so poorly that Microsoft ceased work on it after less than two months in Verizon Wireless stores.

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net;

To contact the editor responsible for this story: Jillian Ward at jward56@bloomberg.net


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