Why Microsoft shouldn't build its own Windows Phones

Reports say that Microsoft may be building its own Windows Phones, in the same way it's designing Microsoft-branded Surface tablets. If true, it would be a bad move, because it has Nokia on the hook to do its bidding.

According to Business Insider, Nomura analyst Rick Sherlund issued a note which said in part:

Separately, our industry sources tell us that Microsoft may be working with a contract manufacturer to develop their own handset for Windows Phone 8. It is unclear to us whether this would be a reference platform or whether this may be a go-to market Microsoft branded handset.

If Microsoft is building it as a reference platform, the move makes sense. But it doesn't make sense if it's going to be a Microsoft-branded phone.

Microsoft has no need to design the phone on its own -- for that, it has a multi-year deal with Nokia. Nokia has essentially bet the company on Windows Phone, and given Nokia's troubling cash position and dependence on Microsoft, it would certain do Microsoft's bidding.

In fact, don't be surprised if Microsoft buys Nokia to save the struggling phone company.

Microsoft has nothing to gain by designing and selling its own Microsoft-branded phone. Doing that for a Windows 8 tablet makes sense, because it has no business partner it can count on to design exactly the tablet it wants. But with Nokia it has that partner. So building its phone simply doesn't make sense.

Copyright © 2012 IDG Communications, Inc.

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