Asian suppliers have whispered to the Wall Street Journal that Redmond is putting together designs for a watch device and is already asking for components, including 1.5 inch touch displays.
An R&D team reportedly shipped suppliers out to Washington to talk through the process, however, it isn't clear whether Microsoft is testing the water or will be making concerted efforts towards a sort-of new breed of smart device. It may be waiting to hear more about moves from the competition.
Microsoft isn't commenting on the rumours, but it already has a history in peddling watches. It once sold smart watches that would show users basic data like news headlines and sporting updates, however, sales stopped in 2008.
Analysts expect wearable electronics to be big business later this decade. Whether watches will contribute to that remains to be seen, but it is almost certain the major players are thinking of new ways to monetise smart products beyond the smartphone.
Microsoft's experiences in selling hardware - outside of consoles - have been somewhat lacklustre to date. Like Redmond's ambitions with the Zune, its latest foray - with the Surface tablet - hasn't excited consumers or pundits yet. Like tablets, Microsoft has been talking about smart watches forever.