Rumor Mill: Microsoft may be working own Windows Phone device

Microsoft (NASDAQ:MSFT) may be working on its own Windows Phone 8 smartphone in a bid to spur sales of the platform, according to a financial analyst.

According to a research note from Nomura Securities analyst Rick Sherlund, who cited unnamed "industry sources," Microsoft may be working with a contract hardware manufacturer on its own Windows Phone device, similar in concept to its just-announced Surface tablet. Sherlund, who recommends buying Microsoft's shares and has covered the company for many years, said he was not sure if the device would be a reference design or branded Microsoft product.

A Microsoft spokeswoman did not immediately respond to a request for comment, but according to a Reuters report, the company neither confirmed nor denied the speculation, saying that Microsoft is a "big believer in our hardware partners and together we're focused on bringing Windows Phone 8 to market this year."

In addition to receiving support from AT&T Mobility (NYSE:T), T-Mobile USA and Verizon Wireless (NYSE:VZ) for the new platform, Microsoft also got backing from several handset makers, including Microsoft partner Nokia (NYSE:NOK), as well as HTC, Huawei and Samsung. So far, Microsoft's mobile platform has been well received by critics and less by consumers.

The idea of producing a reference device or even a branded product is not entirely without precedent. Google (NASDAQ:GOOG) has developed three flagship "Nexus" smartphones to showcase the latest Android software, and is reportedly giving multiple Android device vendors early access to the next version of its operating system as it expands its Nexus device program and tries to husband more control over the devices from carriers. However, the Nexus phones have sometimes caused friction since they have left other Android OEMs not involved in their development scrambling to keep up with the latest Android has to offer.

In other Windows Phone news, analysts are renewing worries that Nokia will be damaged by the fact that Windows Phone 8 will not run on Nokia's current Lumia line of Windows Phones. Older Windows Phones will receive a software update, called Windows Phone 7.8, that delivers a new start screen user interface. However, due to hardware limitations, the older phones will not get the full update.

"Operators and users will hold on until the new devices are in the market this coming autumn," Malik Saadi, an analyst with Informa Telecoms & Media in London, said in a blog post. "This will have a serious impact on Nokia's financial performance this quarter."

For more:
- see this Bloomberg article
- see this Reuters article
- see this WSJ article (sub. req.)
- see this Bloomberg article

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