Microsoft is in the later stages of developing a phone of its own that will rely on performance to drive sales, a rumor floated by the Inquirer today claims. The Windows Mobile developer is allegedly developing a phone that would use one of NVIDIA's Tegra processors as its heart. The feature would likely involve the APX 2500 chip and theoretically give the Microsoft device 720p video playback and advanced 3D visuals that are absent on other phones.

This deal may explain the lack of support for Tegra outside of Windows Mobile devices, the site suggests. The phone would reportedly be introduced at this year's Mobile World Congress (3GSM) in February and released not long afterwards, though Microsoft has historically unveiled new versions of Windows Mobile at the expo but shipped them only in summer or fall.

Most observers believe any Microsoft move into making its own phones is likely prompted by the iPhone, which is already threatening to undermine Windows Mobile market share and has been deemed successful in part due to its control over both the hardware and software. Microsoft has always downplayed the possibility of producing its own phone but has repeatedly mentioned porting Zune elements to Windows Mobile and recently bought out Danger, giving it experience with both hardware and mobile software design from the Sidekick.

The Redmond, Washington-based company has often touted the choice of devices and hardware independence of Windows Mobile but also has a history of effectively overwhelming its hardware partners when deemed necessary. The company had initially promoted Portable Media Center and the PlaysForSure program for music but, with the Zune, effectively ended both of these as firms either switched to their own mobile operating systems and switched to more universal standards like MP3 for their music.