Microsoft working on a "breakthrough" smartphone, strongly hints that it's the Surface Phone

Microsoft’s past performance in the smartphone market hasn’t been particularly impressive. Windows phones made up only 2.6 percent of the worldwide smartphone OS market in the second quarter of 2015, a decline from 3.4 percent in 2013. But now, the Redmond company has confirmed that is working on something that may turn its smartphone fortunes around.
Speaking during an episode of This Week in Tech’s Windows Weekly podcast, Microsoft executive vice president and chief marketing officer Chris Capossela revealed that the company is working on a “breakthrough” new smartphone – and it’s not a going to be another Lumia.
While Capossela didn't specifically say the new device will be the long-rumored Surface Phone, he did strongly hint at it. “With Surface we had a bunch of early misfires, but that notion of a tablet that could replace your laptop. That notion of saying, Hey, Apple wants to sell you an iPad and they want to sell you a Mac, we think there’s one device that exploits the seam between those two devices. We need some sort of spiritual equivalent on the phone side that doesn’t just feel like a phone for people who love Windows.”
Compared to today’s smartphones, the Surface Phone is expected to be much more like a PC. Microsoft will likely ditch the traditionally-used Qualcomm chips for Intel architecture and use a software setup more commonly found in home computers. It’s also rumored that Microsoft will be giving the Surface Phone the ability to run full Windows software, not just apps from the Windows Store market, creating a true PC/smartphone hybrid device.
A Surface Phone would likely utilize Windows 10 Mobile’s Continuum feature that can turn a smartphone into a PC by allowing it to attach to a monitor, mouse and keyboard in order to create a desktop-like experience.
We may have to wait a while before we see the Surface Phone, although some reports say it could be here as early as the second half of 2016. Speaking about the mystery device, Capossela said "I think we have to do more breakthrough work" to make Apple fans "pause before they buy their 17th iPhone.”