Ballmer On Microsoft's iPhone Killer: 'We'll See What Happens'

Microsoft has unequivocally denied

Yet in a Monday interview with CRN at Microsoft's Worldwide Partner Conference, CEO Steve Ballmer left the door open to such an eventuality, which would run counter to its traditional approach of partnering with device manufacturers.

"Look, we’ll see what happens. We have good partners with Nokia [and] HTC in the phone space," Ballmer told CRN. "I love what we've got going on with the Surface. We are going to focus on Surface and our other Windows 8 tablet partners and see if we can go make something happen."

[Related: Microsoft's Ballmer Touts New Products, Mum On Channel Surface Tablet Sales ]

Windows Phone 8 is expected to arrive sometime this fall, and it represents a major strategy shift. Windows Phone 7 uses the legacy code base of Windows CE, but Windows Phone 8 will share common code with Windows 8. Microsoft is trying to make it easier for developers to build apps, but the downside is that Windows Phone 7 devices won't have an upgrade path to Windows Phone 8.

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Microsoft is getting into tablet hardware in part because its OEM partners haven't been keeping pace with the innovation coming out of Apple, Ballmer told CRN. If the Surface approach is successful, it's hard not to see Microsoft applying it to smartphones as well.

In addition to tighter control over hardware-software integration, a Microsoft phone could allow it to negotiate directly with carriers and deliver updates in a standard fashion, said Chris De Herrera, founder of the PocketPC FAQ Website and an expert on Microsoft mobile issues.

However, Microsoft does not have experience building and supporting smartphones, particularly when it comes to hardware design, manufacturing, cell phone testing, hardware repair replacement and relationships with accessories vendors, De Herrera said.

Microsoft's smartphone hardware partnerships are not exactly set in granite, either. Despite being labeled a "good" partner by Ballmer, Nokia couldn’t have been pleased to see its Lumia 900 left out in the cold when Microsoft abandoned Windows Phone 7.5.

Meanwhile, Microsoft isn't allowing HTC to build Windows 8 RT tablets because the OEM lacks experience in the market, Bloomberg reported last month. Samsung and Huawei are also building Windows Phone 8 devices, but both also sell Android devices.

Microsoft has already tried its hand at smartphone design, but its Windows Phone-branded Kin devices, built by Sharp, flopped badly after their release in 2010.

In fairness, the Kin devices -- the fruits of a top secret effort called Project Pink that came from Microsoft's acquisition of Danger in 2008 -- can't be compared to Microsoft's current mobile efforts. In fact, Microsoft surely gained valuable experience from Kin's failure.

Ballmer's "Let's see what happens" comment doesn't necessarily mean Microsoft is considering building its own smartphone. But, it’s clear that every option is on the table for Microsoft right now as it renews its quest to out-innovate Apple, so this wouldn't come as a huge surprise.