If a new tip is to be believed, Microsoft will finally release the highly speculated Surface Phone in the second part of 2016.

Microsoft insiders told WindowsCentral that the handset is being developed by the Surface team led by Panos Panay. The group is responsible for the Surface Pro tablet series and the newly released Surface Book.

Sources added that the upcoming Surface Phone replaces a metal-built Intel-powered Windows 10 handset that would have been released in May 2016. The latter's cancelation was apparently due to it being a stale project from Microsoft's buyout of Nokia's Devices and Services division.

Tech pundits speculated that Microsoft's lack of widespread carrier support for the Lumia 950XL and Microsoft Lumia 950 in North America has pushed the company to create a new line of smartphones, starting with the Surface Phone. This could also explain why the Redmond tech giant isn't spending boatloads of money promoting its pair of high-end Windows 10 flagships, which has resulted in lackluster sales.

In fact PC Advisor reported that pre-order prices of both devices dropped as much as nine percent in the UK just to bolster sales. The Lumia 950 XL, in particular, went through three price cuts in the month of November. Read full story here.

Murmurs regarding the Surface Phone had been going around for the past couple of years until word eventually dissipated in early 2015. However, speculation was revived two months ago when a credible tech journalist by the name of David Pierce visited Microsoft's headquarters to interview Panos Panay. The reporter noticed machines working on a prototype handset near the area where Microsoft was mass producing components of the Surface Book.

"As soon as we start talking about it (the Microsoft Surface Book), he gets distracted by a CNC machine that's milling a Surface Book's bottom bucket. Panay just watches it for a moment, carving over and over to form the antenna gap. A few machines away, another machine works on a prototype of a new phone. And there are rooms everywhere in Building 87-top-secret ones-filled with new devices. Panay has to go check on them, too," said Pierce on Wired.

Pierce didn't definitively say the prototype was for the Surface Phone, but he did mention that the handset was being designed by the Surface team.

Initial specs sheet of the Surface Phone have yet to be reported. However, rumor has it the device will focus on productivity. It is said to be a flagship unit that will be powered by Qualcomm's Snapdragon 820 SoC.