Word on the street is that Microsoft is working with component suppliers in Asia to test their very own smartphone design, at least if the Wall Street Journal's sources are to be believed. There has been a rumor circulating that this was the case ever since Microsoft unveiled their new Surface tablets.

Of course, Microsoft has refused to comment on the rumor, neither confirming nor denying the smartphone's existence. Microsoft's parts suppliers say that there is a current device being tested, though its not clear that the device will go into mass production or not. The screen is reportedly between 4 and 5 inches, slotting in between the iPhone 5 and the Galaxy S III.

"We're quite happy this holiday [season] going to market hard with Nokia, Samsung and HTC," said Mr. Ballmer. "Whether we had a plan to do something different or we didn't have a plan I wouldn't comment in any dimension."

Nokia's chief executive has welcomed a Microsoft-made smartphone as he believes that it would increase sales for all companies producing Windows Phone 8 devices. He also believes Nokia can stand out from competing devices. This is a different take than the computer manufacturers who were upset when Microsoft announced the Surface tablet.