Microsoft exec: We don't need to build a Microsoft phone

NEW YORK -- Microsoft sees no need to build its own smartphone to help kick-start sales of devices running its Windows Phone operating system, a company executive said today.

Terry Myerson, a vice president at Microsoft working on the Windows Phone team, told All Things D reporter Ina Fried at the Dive into Mobile conference here this morning, that the company feels its device partners Nokia and HTC are doing just fine when it comes to building smartphones using the Windows Phone operating system.

The precedent for moving directly into phone hardware lies in Microsoft having built its own tablet, the Surface. And there has been speculation that Microsoft would also develop its own smartphone handset. But Myerson said that the company doesn't see a need to do so.

Microsoft's main hardware partner for smartphones is Nokia. While the company was once the leader in worldwide cell phone sales, it has been struggling in recent years, and its sales have plummeted and not regained momentum with the company's new focus on Windows Phone. Meanwhile, competitors, such as Samsung and Apple, have grown.

Still, Myerson believes that Nokia remains a strong teammate.

"Nokia a great company," he said. "We are proud of the work they have done. They have developed devices with more price points. They have built high-quality, entry-level hardware. And they are a great partner for Microsoft."

He also said he doesn't see a need for Microsoft to step in and develop hardware for Windows Phone 8. What would it take, Fried asked, for the company to go this route?

"It would have to be something that Nokia or HTC or any of our primary partners wasn't providing the consumer," he said. "But we don't see that happening. So we don't see a need [for Microsoft to build its own device]."

Apple: 'Out of steam.' Android: 'A mess'
Windows Phone sales are not as dismal as some people may think, Myerson added. He acknowledged that operating system leaders Google Android and Apple iOS still dominate, but he said that Windows Phone is a strong challenger, particularly in markets where carriers are not subsidizing devices.

"Apple and Samsung put their best innovation in phones that cost $650 and that sell at volume for about $200," he said. "For us the opportunity and momentum is to offer a phone for less than $600 and sell at higher volumes. We are getting good traction in markets like Mexico and Italy, where operators aren't subsidizing the devices."

Myerson said that Microsoft isn't turning away from the U.S. market, where consumers are still very much used to the carrier subsidy model. But he said it's important for the company to focus on markets where it can be successful as an upstart.

"We are a challenger and everyone can't afford a $600 phone," he said.

And there is great opportunity for Microsoft, he said, as its competitors face their own struggles.

"When you look at Apple, I think there is a sense of a lack of urgency," he said. "iOS 5 added a fifth row of icons. That's it. They're running out of steam. And Android is kind of a mess."

He said that Samsung is in the midst of a mutiny and it's the only major handset maker to be making any money using the platform. All of this means that Microsoft has an opportunity, he said

As Microsoft competes with these companies, Myerson said, it will focus not only on price and making sure that consumers can get good quality smartphones at all price points, but he said the company also wants to enhance the experience of the consumer. How? One of the ways is that the company will be to better integrate its products. This means, for instance, a tighter relationship between Windows Phone 8 devices and the Xbox.

Update 7:24 a.m. PT: More detail from the interview has been added to this story.