Once more, with feeling: Microsoft says isn't making its own phone

Microsoft officials emphasized again this week that the company is not -- contrary to evidence and opinion -- making its own Microsoft-branded phone.

Microsoft officials emphasized again this week that the company is not -- contrary to evidence and opinion -- making its own Microsoft-branded phone.

Financial analysts attending the Mobile World Congress show in Barcelona this week asked Andy Lees, Senior Vice President for Mobile Communications, during a Q&A session on February 16 about Microsoft's phone plans. (I listened to the Q&A with analysts via a Webcast.)

Lees acknowledged Microsoft has been beefing up its hardware-engineer headcount in its mobile business unit, as of late. (A good part of that new headcount is the result of Microsoft basically disbanded the Zune business, sending the software engineers to Media Center TV land and the hardware-focused folks to the Mobile business unit.)

But Lees insisted that Microsoft is adding to its hardware ranks inside the mobile unit not because it is building a phone itself, but because it is attempting to provide tighter hardware/software/services integration in the phone space.

Lees disagreed with one financial analyst who posited that the only way to create a runaway best-selling phone is for a vendor to provide both the hardware and the software, like Apple is doing with the iPhone. Lees said Microsoft's intent is to provide users with  a choice of third-party phones at  variety of price points -- and to work hand-in-hand with phone makers to ensure the software is tailor-made for their phones.

So what about Danger -- the company behind the T-Mobile Sidekick that Microsoft acquired in 2008, analysts asked Lees. Lees reminded the financial folks that Danger doesn't make phones; Sony makes the Sidekicks sold in the U.S. Microsoft bought Danger for its services know-how.

"It's true we are working significantly closer with hardware engineers, silicon vendors and OEMs," Lees said. "Part of our strategy is to get very close to that." But to assume "they must be doing a Zune phone" or "they must be making a phone" is not an accurate leap to make, Lees said. He emphasized again that Microsoft is charging phone makers a royalty per phone -- the size of which he equated to the price of a piece of glass used in a cell phone. But Microsoft is not making its own branded phones, he stated again.

Lees admitted that Microsoft increased focus on tighter hardware-software integration is "a change from what we've done historically." He said that while the phone operating-system is important, seamless "end-to-end experiences" are more so.

Studies have found that after making calls and sending text messages, the No. 3 task consumers do with their cell phones is take pictures, Lees said. Microsoft wants to streamline the end-to-end experience of capturing/manipulating/sharing/storing pictures and is working more closely with phone makers to enable a better user experience with this kind of scenario.

I've blogged previously that Microsoft is working on chassis/reference designs for forthcoming Windows Mobile 7 smartphones in conjunction with a handful of partners. After yesterday, we now know that one of those partners is LG. Microsoft and LG are setting up joint R&D teams, the companies said, to make Windows Mobile the primary platform that LG will support, going forward.

It's key to notice what Microsoft officials aren't saying in all this. Lees is saying Microsoft is currently not in the business of making its own phones. He did not say Microsoft will never make a Microsoft-branded phone.  But for the next couple of years, the Softies are going to continue to rely on third party hardware makers in the smartphone space, the same way they are in the PC space. And just as in the PC space, Microsoft is getting a lot more hands-on about helping influence its partners in their design and development.

Do you think Microsoft can succeed in the smartphone market without making its own phone? Do you believe it's inevitable that, at some point, we'll see a Microsoft-branded Windows phone?