Is Microsoft really building its own Windows Phone? Well, building definitely. Planning to bring to market? I’m not so sure. And if they do, what does that really mean?
Microsoft has always been building Windows Phones. One of the original development platforms for Windows Phone 7 was a device that Microsoft Research designed for its own research efforts and then did a manufacturing run to give to the Windows Phone development team. And Microsoft has long done reference designs for new systems and offered them to OEMs either purely for reference or even for licensing to build and sell on their own. I don’t know if any of the WP7 or 7.5 devices were based on Microsoft’s designs for a hero phone, though I doubt it. Instead OEMs seem to have focused on taking their original designs (for Android or Symbian) and reworking them to meet the Windows Phone specs. So we can’t be sure that a leak about a Microsoft-branded Windows Phone is for a reference design they’ll use internally or is something they will actually bring to market.
Microsoft’s problem with Windows Phone isn’t with its OEMs. The crop of Windows Phone 8 devices is plenty compelling enough to compete with the iPhone and latest Android phones. Microsoft’s problem is with marketing and with its reliance on Carriers. Having their own phone gives them a channel to help address the marketing problem, but does nothing to solve the fact that despite all the rhetoric the carriers are OS agnostic. They just want your monthly service fee. And that makes selling iPhones and Android the path of least resistance. Stick a Surface Phone in an AT&T store and it isn’t going to get any more love than a Nokia Lumia 920 gets. And Microsoft’s own retail footprint is so small that it is immaterial. You aren’t going to impact market share by even a 100th of a percent by sales of Surface Phone’s through the Microsoft Stores.
What a Surface Phone would do is give Microsoft something to market directly rather than indirectly through OEMs and Carriers. I think they’ve concluded that promoting “Windows Phone” doesn’t get them anywhere. Verizon’s advertising for Droid phones, not the Android OS, made Android popular here in the U.S. People then walked into stores asking about a “Droid” and were sold whatever Android phones that carrier offered. Microsoft could advertise the heck out of a Surface Phone, with the real intent of legitimizing Windows Phone. If it offered said Surface Phone only through limited channels (as is the plan with Surface tablets), perhaps explicitly not including carrier stores initially, it would actually help drive sales of Nokia and other OEM devices.
But for a Surface Phone (or other Microsoft branded device) to really move the needle on Windows Phone market share Microsoft would need to somehow change the game in terms of the carriers. That is, they’d have to figure out how to take the carriers out of the loop. And that is a wildly larger challenge to consider than just introducing a phone with their own branding.