MSFT Microsoft Corporation

By Sarah E. Needleman and Joanna Stern 

Microsoft Corp. is returning to the smartphone game and plans a suite of new wireless computing devices, including two with dual screens that fold together like a book.

At a New York press event Wednesday, the company surprised onlookers when it disclosed plans to re-enter the smartphone business by the 2020 holiday season with a foldable, dual-screen device called the Surface Duo.

Microsoft exited the phone-hardware business by late 2017, following an unsuccessful bid to gain market share which included buying Nokia's phone division.

The Surface Duo will run on Google's Android operating system and feature the Google Play Store. Microsoft said it collaborated with Google on the software and that it plans to develop its own software to support dual-screen Android devices.

"As a company, we want to meet customers where they are. Working with Google over the last several months has been awesome," said Panos Panay, Microsoft's hardware chief.

A key selling point for the Duo is that it enables a user to video chat with someone on one screen while surfing the internet on the other, Mr. Panay said. "People need to use their phones to be productive, but phones have their limits," he said.

The coming Surface Neo foldable tablet, also due in late 2020, supports a magnetically attached keyboard and pen, both of which charge wirelessly when connected to the device. It features a processor from Intel Corp. and runs on a new version of the Windows 10 operating system designed specifically for dual-screen devices.

Mr. Panay said the company announced the Duo and Neo a year in advance so software developers can create apps for the dual-screen design. Microsoft is working with cellular carriers for a 2020 release, he added.

Microsoft's Duo and Neo don't have individual screens that are foldable. Foldable-screen devices have proven a tough manufacturing challenge for firms including Samsung Electronics Co. Samsung is releasing a new version of its Galaxy Fold smartphone with a $2,000 price tag, which comes after t he earlier release was scrapped in April after screens started to break. Mr. Panay said the company is looking into foldable screens but that there are challenges when using plastic -- which current foldable screens require -- versus glass.

During the presentation Wednesday, Microsoft executives focused on the ability for Surface users to move seamlessly from work and personal tasks within devices.

Wedbush analyst Dan Ives described Surface as "the tip of the spear" across Microsoft's broader ecosystem, which includes the Office 365 suite of products including Word and PowerPoint. For the year ended June 30, Surface revenue rose 23% from a year earlier to $5.72 billion. "This remains a mind and market share strategic gamble for [Satya] Nadella & Co. that is in the early stages of playing out," he said in an investor note.

At the event, Microsoft also showed off expected updates to its Surface laptops and tablets, due out in the coming months.

Devices that can double as a tablet or laptop account for about 10% of the PC market, research firm International Data Corp. said in September. World-wide shipments of so-called 2-in-1 devices are also expected to grow at a faster rate than the broader PC market through 2023, according to IDC data.

Also joining its peers, Microsoft plans to sell wireless earbuds later this year. The voice-enabled round earbuds would start at nearly $250 and have 24-hour battery life, the company said. Its announcement comes a couple of weeks after Amazon unveiled new wireless earbuds. Microsoft previously had headphones in its Surface audio-products lineup. Apple Inc.'s AirPods have 53% of the global earbud market share, according to Counterpoint Research.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Joanna Stern at joanna.stern@wsj.com

(END) Dow Jones Newswires

October 02, 2019 14:13 ET (18:13 GMT)

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