According to some rumours started by the Inquirer today (ignore their linked ‘video proof’ as it’s clearly a joke), Microsoft is in the final stages of building a phone – the first of its own brand – that will rely on performance to drive sales. They’re allegedly developing a phone that uses one of NVIDIA’s Tegra processors. This processor (likely the APX 2500 chip) would theoretically give the Microsoft device 720p video playback and advanced 3D visuals that no other smartphone on the market has, to date.

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As the rumour has it, we’ll be hearing more about this in February at 2009’s Mobile World Congress (3GSM) and released shortly afterwards.

If this isn’t painfully obvious enough already, if this rumour is true, it is clearly a retaliation against Apple’s iPhone… and it’s about time! Microsoft has always downplayed the possibility of producing its own phone but between porting Zune elements to WinMo and the recent purchase of Danger, we knew it was on the horizon.

[via]