"This is an incredibly competitive market," Sullivan said. "Technologists are optimists and this is a great time to be here."

Sullivan said Microsoft has created a video that envisions a future world of the next decade for mobile phones, including one with a phone that projects an arrow to help a person find a location in a crowded mall or airport. The projection capability is available today on the LG Expo, he noted, but he said an application to connect GPS location information to the arrow's directions is not on the market.

Sullivan said Microsoft researchers "come up with all kinds of crazy thoughts" that his team tries to take advantage of. "It might be augmented reality or induction charging of phones through the air," he said. Long battery life and easy charging is going to be a constant concern of designers, he said.

He said his team hasn't formally referred to any coming phones as "superphones" but he's familiar with the concept as a description of a next generation category.

Augmented reality could be used to connect a superphone to an image projected to eyeglasses, showing the user where to go in a crowded room to the find someone, Stofega said. "Obviously, something like that is complex, requiring that charts and identifies locations within the user's location," Stofega said.