Veteran tech analyst Tim Bajarin stresses in a recent that Microsoft will never have innovative smartphone hardware if it is just a partner. It must own hardware to control hardware innovation, he says.

"Microsoft clearly wants Windows Phone 7 to become a worldwide hit and at this moment, Nokia is just another distributor of Windows Phone 7 in the same way HTC and others are," writes Bajarin.

"But if Microsoft's decides to keep its OS as a pure licensed property and trust the hardware partners to innovate on their own, that boat has sailed. Microsoft too will come to the conclusion that if they want Windows Phone 7 to be the third major alternative to Apple's iOS and Google's Android, they will need to own the hardware as well as the software and services."

On the flip side, it may be wiser for Microsoft to stick with its Nokia "collaboration agreement." Why? Because Microsoft cannot afford to alienate its phone-maker partners the way that Google could.