Microsoft's strategy behind the Surface hardware lineup is to invent new product categories and encourage the OEM partners to follow in its footsteps. Launching a traditional smartphone does not align with this strategy and has not worked will with Microsoft in the past.
While Microsoft is indeed thinking about new form factors, it would not include a so-called Surface Phone.
In an interview with Wired, Microsoft's Surface head Panos Panay confirmed that the company is working on new form factors. When questioned about whether this would include a new Surface Phone, Panay stated that the Surface Phone was not one that they are thinking about at this time.
"I wouldn't say that it includes a Surface Phone," Panos answered in the interview. "I think you have to think about where is that unmet need when you're thinking about your product road-map," he replied.
"Of course, we’re always inventing, of course, we’re thinking about new form factors,” Panos added. "The way people will communicate in the future will change. The form factors will wrap around that. And so when you say the phone form factor changes, I would flip it a little bit and say that communication changes."
The next big project is a dual-screen device and it's reportedly codenamed Andromeda. The highly-anticipated Andromeda is supposed to create a new category of devices with phone capabilities. Microsoft has however pushed back the unveiling of Andromeda from a potential 2018 release to 2019.