Microsoft is currently working with component suppliers in Asia to test a first party smartphone.
That's according to Wall Street Journal sources allegedly working at some of Microsoft's parts suppliers, who said the Xbox maker isn't yet sure if a smartphone product will enter mass production.
The screen of the Microsoft phone currently being tested reportedly measures between four and five inches diagonally. In comparison, iPhone 5's display measures four inches, while Samsung Galaxy S III's screen measures 4.8-inches.
Earlier this week Microsoft CEO Steve Ballmer told the WSJ: "We're quite happy this holiday [season] going to market hard with Nokia," referring to the Finnish communication company's use of Windows Phone as its main smartphone operating system. "Whether we had a plan to do something different or we didn't have a plan I wouldn't comment in any dimension."
Microsoft launched the Surface tablet and Windows 8 operating system on October 26.