By Eva Dou
TAIPEI--Taiwanese PC maker Asustek Computer Inc. (2357.TW) is in
talks with Microsoft Corp. (MSFT) on a licensing deal to offer
Windows 8 mobile phones, an executive said, making it the latest
Asian computer maker eyeing the new operating system as a possible
differentiator in the cutthroat smartphone market.
PC makers have been trying to cross into the mobile space and
with good reason: smartphone shipments grew 45.1% last year,
compared to a 3.2% contraction in PCs, according to researcher
IDC.
Taipei-based Asus, as the company is widely known, was founded
in 1989 and partnered with Google Inc. last year on the popular
Nexus 7 tablet that retails for US$199. But the company is still
struggling to be perceived as a global player and it hasn't been
able to establish a strong brand presence in the U.S., analysts
said.
Asus has broached the topic of making a Windows 8 version of its
so-called Padfone---a smartphone that docks into a tablet--to
Microsoft as it seeks to expand its fledgling smartphone business,
said Benson Lin, corporate vice president of mobile communication
products, in a recent interview.
"With our Padfone concept, the phone plus tablet, I think it
makes sense for Windows 8...we are in discussion over licensing
fees," Mr. Lin said. "There is no target timeline...but we are
interested in making Windows phones."
A Taipei-based Microsoft spokeswoman declined to comment on
discussions with Asus.
Mr. Lin said Asus is also talking with U.S. telecom operators,
with a goal of launching its phones in the U.S. by next year.
Microsoft's new touch-based operating system for phones has been
met with some skepticism, analysts said, due to its relatively
small offering of apps. But Nokia Corp.'s better-than-expected
sales of its Windows phones in the fourth quarter has helped the
outlook for the operating system. Nokia announced this month that
its smartphone shipments rose for the first time in a year, helped
by brisk sales of its new Lumia phones running Windows
software.
Smartphones running Windows 8 are currently made by Nokia, HTC
Corp., Samsung Electronics Co. and Huawei Technologies Co.
Windows 8 is Microsoft's first operating system designed to work
across traditional computers, tablets and smartphones. Although
Asus has made mobile phones on and off for years it has so far
failed to progress beyond a marginal player in the market. Most
recently, a partnership with U.S.-headquartered GPS company Garmin
Ltd. on Windows and Android phones petered out in 2011 because of
stiff competition and the popularity of Google's free navigation
system, Mr. Lin said.
Last April, Asus launched the Padfone, a line of high-end mobile
phones that dock into a tablet. Chairman Jonney Shih said in the
interview at the company's Taipei headquarters that the mission to
create a phone that could compete with Apple Inc.'s iPhone 5 and
Samsung's Galaxy Note preoccupied Asus' highest level executives in
hundreds of meetings, many stretching past midnight, as they strove
to reposition the company for the shift toward mobile.
"Inevitably, computing will not only be limited to the PC," said
Mr. Shih. "We have to be prepared for that."
The second-generation Padfone launched in October is a 4.7-inch
Android phone that docks into a 10.1-inch tablet. The Padfone 2 has
a slightly lower screen resolution than the iPhone 5 but a higher
resolution camera, and sells for NT$19,901 (US$686) in Taiwan.
Wanli Wang, an analyst at RBS said the market for a phone that
docks into a tablet is limited, and he questioned the company's
ability to increase its brand recognition in a market dominated by
big names like Apple and Samsung.
To gain more ground, Asus will start selling the Padfone 2 in
China next month, Mr. Lin said, as part of its goal to increase its
smartphone sales by "several times" this year to more than 1
million.
The global smartphone market numbered 717.5 million units in
2012, according to IDC. Asus currently sells its phones in 20
countries in Europe and the Asia Pacific.
Write to Eva Dou at Eva.dou@dowjones.com
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