The comment that the Chinese report was referring to actually came from a Seattle Times report published last week. Huawei's head of international media affairs Joe Kelly stated at the time that Huawei had produced two models running Microsoft's smartphone OS before it said it was putting its plans for future Windows Phones on hold. Kelly noted that "We didn't make any money in Windows Phone. Nobody made any money in Windows Phone."And with prospects of only capturing 5% of the market by 2018, there's no incentive to enter that market.

The Chinese report added that Huawei canceled its development plans for Windows Phone equipment in August, saying that it wasn't worth the effort.

This was not the first negative statement made about Microsoft's mobile phone system. Developing a phone using a Windows platform independently was not easy because of the high cost of equipment compared to the cost in sales, said Shao Yang, chief marketing officer.

Huawei wasn't going to compete in the low-profit budget phone market. They prefer to move into the high-end market, even if it means decreased sales during the transformation, Kelly said. Currently, Huawei makes around 30% of the handsets in the US and will put more effort into exploring the market.

Recently Huawei was dislodged from their third place standings in the smartphone market by Xiaomi. It seems you can't go a day without running into a new Xiaomi story of how their gaining momentum in the market.

At the end of day, Microsoft got slapped around by another former smartphone OEM partner. That doesn't bode well for them. Both Microsoft and Intel are playing at the peripheries of the smart device revolution while desperately trying to buy their way into the market. Whether it's acquiring a phone company like Nokia or subsidizing tablets in China or throwing money at backing Google Glass.

Microsoft's efforts in trying to mimic Apple's business model of focusing on hardware and software has yet to make any sense for them, never mind dollars. They're committed to this track that Steve Ballmer put them on and it's just going to have play out before they either give up on hardware or strike a vein of technology gold with one smash hit. There wasn't a hit to speak of for them in 2014 and so only time will tell how this story ends. If you have a prediction about that, send in your comments below. 

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