A Microsoft Surface Phone sure to come, but unlikely at MWC

'What the heck will Windows 10 be for mobile?' analyst asks

Microsoft plans to show its latest smartphones at Mobile World Congress in Barcelona in late February, but don't expect much news about the much-rumored, business-oriented Surface Phone.

Analysts widely expect Microsoft will launch a so-called Surface Phone in late 2016 or early 2017. It is generally described by Microsoft observers as being a premium -- even revolutionary -- smartphone running Windows 10 (or later) that will be built by Microsoft's Surface Pro 4 and Surface Book team headed by corporate vice president Panos Panay. The device would support all the familiar Windows apps widely used by businesses, such as Office 365.

"Microsoft has nothing to share on rumored devices in response to your questions about the so-called Surface Phone," a Microsoft spokesperson said via email on Monday. At MWC, Microsoft will show its latest device and products, but will be "showing even more innovation at upcoming Microsoft events."

The spokesperson also said that the so-called Astoria bridge "is not ready yet," referring to an option for developers to be able to port Android apps to the Windows platform. News that Astoria was delayed first surfaced in November, and subsequently some developers had assumed Astoria was dead. There are already bridges available now for web and iOS, and soon for Win32 apps.

Microsoft's coy response about the Surface Phone surprised some analysts who follow Microsoft closely.

"I am expecting the Surface Phone by the end of this year or the beginning of next year," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "Microsoft won't launch anything until it's truly breakthrough." In the meantime, Microsoft will continue making phones like the Lumia 950 and Lumia 950 XL that launched last fall and were not considered premium-quality phones, he said.

Jack Narcotta, an analyst at market research firm TBRI, said while the Surface Phone has not been officially confirmed, it makes sense for Microsoft to build it, even if the Windows Phone OS is only about 2% of the global smartphone market today.

Narcotta and other analysts say a future Surface Phone could serve the needs of business users much in the same vein that the BlackBerry has. "Windows Phone as a BlackBerry killer or as the new work-issued mobile device — that's where things get interesting for Microsoft," he said.

"I don't expect to hear about a Surface Phone at MWC, but the case is getting stronger for it as Microsoft hones its manufacturing chops with the Surface Book and Pro 4," Narcotta said. The allure of a Surface Phone would be "how Windows 10 as a mobile platform is a much better friend to IT, since Windows is a known quantity, you can secure it using many if not all the same tools you currently use, you don't have to work about user profiles or information management since Active Directory and other tools take care of that," he said.

Narcotta said Microsoft has been mostly quiet about the Surface Phone partly because "they are trying to figure out what the device will do" because there are dozens of device objectives to address. "They don't just want hardware, they want to use the hardware as the tip of the spear so that Windows 10 can run the same on the tablet or mobile device," he said. "Surface Phone is a bit about the phone itself, but much more about Windows 10 as the optimal platform for all business needs, regardless of device or form factor."

The ability to run Windows 10 on all hardware platforms has been the objective of Microsoft for at least two years. Because Microsoft's marketing message has been less than clear about how that cross-platform approach will work for smartphones, some IT shops have become impatient.

Microsoft Chief Marketing Officer Chris Capossela gave some hints in a December interview about the need for something like a Surface Phone, without referring to it by name.

"We're clearly very cognizant of our position in the phone world, and frankly we've done the hard yards to retrench and have an approach that, in this coming year, is very much about trying to satisfy our fans, and trying to have a great success in the business world, for businesses who want to buy phones for their employees," Capossela said.

"We need some sort of spiritual equivalent [to Surface Pro] on the phone side that doesn't just feel like it's a phone for people who love Windows," the CMO added. "It's got to be a phone where it's like, 'Wow, that's a real shock or that's a real breakthrough and that's going to make me pause before I buy my 17th iPhone.' And we need time to actually go build that."

Microsoft has already made some headway with its Continuum concept, which allows a Lumia 950 or 950XL user to connect those Windows 10 phones to a large display, full keyboard and mouse where it acts as the compute power for those other devices. Microsoft has been offering a Display Dock for $99 in the Microsoft Store to make the Continuum connection for the Lumia.

Display Dock, which is about the size of a cigarette pack and with seven different ports, was first announced in October.

Moorhead said he uses a Lumia 950 with a Display Dock to connect to a large display with 1080p resolution. "It could be the long-term future of the smartphone, where the smartphone becomes your only device," he said.

The biggest problem is that Display Dock doesn't work with phones running Android or iOS, the lions of the smartphone market.

"Continuum isn't necessarily the answer for Microsoft," Narcotta said. "The user experience you have is the answer, with apps and services. Having software that offers a single pane of glass to do things, where you can walk into an office and view work on a phone and fling it to a big screen — that's pretty powerful."

However, he added, "There's not a lot of user base [for Display Dock] outside the Lumia ecosystem. It's a proof of concept but so far it has limited range. Microsoft can yell about it as loud as they want, but the megaphone isn't that large. They need to crank it up. They haven't articulated what the heck Windows 10 will be in mobile."

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