Citing people familiar with the matter, the financial publication said the two companies are currently discussing possible terms of the deal. It adds that Microsoft has been working on its own touch-screen smartphone hardware under the code-name "Pink."
The project would reportedly leverage and then extend upon Microsoft's existing Windows Mobile operating system, adding new capabilities that would undoubtedly mirror many of Apple's advances in the mobile space, including the Windows Marketplace for Mobile -- a clone of Apple's App Store.
"While Microsoft is involved in the design of the phone's software and hardware,*a third-party*is expected to*make the device, just as Google Inc. has worked closely with partners to make handsets based on its Android operating system," the report says. No further details were reported.