Microsoft denies smartphone rumours

Rumours of Microsoft launching its own phone have been doing the rounds for the last few weeks. First came the buzz about a Zune phone and then the chatter about a new NVIDIA-based smartphone. Now Microsoft is responding and its answer is ''No''.

Microsoft's director of Windows Mobile, Scott Rockfeld, said in a statement, ''Microsoft has no plans to make a phone. Our core focus has been and will continue to be providing software plus services and working with our partners to deliver great phones. Our partners have been integral in our success to date, and we are excited about the innovation we are bringing to the market together. We continue to collaborate with NVIDIA on the delivery of innovative solutions that move the smartphone industry and the consumer experience forward.''

Speculation about a Microsoft phone recently intensified. Microsoft could release a Zune phone at the Consumer Electronics Show in Las Vegas based on its struggling media player platform. A Zunephone never made its debut at CES.

That didn't stop two other Wall Street analysts from making a new prediction earlier this week. "Multiple industry sources are telling us that MSFT is planning to launch a smartphone," Broadpoint AmTech analysts Rob Sanderson and Mark McKechnie wrote. "We are told it will be a 2H launch. We do not see this as landscape-changing, much like their Zune launch.''

As bloggers worked themselves into a frenzy over the latest tidbit, Microsoft stepped in with its denial.

Much of the talk about a Microsoft smartphone is the result of the company's Windows Mobile operating system facing increasing threat from other platforms. In the last few months, Google's open source mobile OS, Android, has bagged the attention of handset makers. Motorola, HTC and LG among others are working on new Android-based phones to be introduced later this year. Even Palm, a Windows Mobile loyalist, plans to move away and introduce its own operating system for upcoming Palm Pre phone.

With Windows Mobile, Microsoft has said earlier it cannot afford to build its own device. Windows Mobile depends on other handset makers for distribution and the company would rather not compete with its partners.

It's not puzzling for Microsoft to do reference designs, rather than create a smartphone. Longtime Microsoft observer Michael Gartenberg is convinced there will never be a Microsoft phone. On 5 February, he blogged:

''I think it's pretty clear that we're not going to see a phone from Microsoft. I've talked about why we wouldn't see a Zune phone before but it's worth repeating. The business model of Windows Mobile is totally different than Zune and the Xbox (in fact, I'd argue that we'll see Microsoft get out of the Zune hardware business long before they become a direct handset vendor).''

Michael doesn't believe there is a Microsoft business model for cell phones. In a November Silicon Alley Insider post, Dan Frommer explained how Microsoft would have to sell 300 million Windows Mobile licenses to make the same money that Apple did selling 6.9 million iPhones. Mobile handset shipments are expected to top 1.3 billion in 2009, with fewer than 250 million being smartphones. Microsoft can't sell enough licenses to match even one-quarter of iPhone revenues.