By Eva Dou

TAIPEI--Taiwanese PC maker Asustek Computer Inc. (2357.TW) is in talks with Microsoft Corp. (MSFT) on a licensing deal to offer Windows 8 mobile phones, an executive said, making it the latest Asian computer maker eyeing the new operating system as a possible differentiator in the cutthroat smartphone market.

PC makers have been trying to cross into the mobile space and with good reason: smartphone shipments grew 45.1% last year, compared to a 3.2% contraction in PCs, according to researcher IDC.

Taipei-based Asus, as the company is widely known, was founded in 1989 and partnered with Google Inc. last year on the popular Nexus 7 tablet that retails for US$199. But the company is still struggling to be perceived as a global player and it hasn't been able to establish a strong brand presence in the U.S., analysts said.

Asus has broached the topic of making a Windows 8 version of its so-called Padfone---a smartphone that docks into a tablet--to Microsoft as it seeks to expand its fledgling smartphone business, said Benson Lin, corporate vice president of mobile communication products, in a recent interview.

"With our Padfone concept, the phone plus tablet, I think it makes sense for Windows 8...we are in discussion over licensing fees," Mr. Lin said. "There is no target timeline...but we are interested in making Windows phones."

A Taipei-based Microsoft spokeswoman declined to comment on discussions with Asus.

Mr. Lin said Asus is also talking with U.S. telecom operators, with a goal of launching its phones in the U.S. by next year.

Microsoft's new touch-based operating system for phones has been met with some skepticism, analysts said, due to its relatively small offering of apps. But Nokia Corp.'s better-than-expected sales of its Windows phones in the fourth quarter has helped the outlook for the operating system. Nokia announced this month that its smartphone shipments rose for the first time in a year, helped by brisk sales of its new Lumia phones running Windows software.

Smartphones running Windows 8 are currently made by Nokia, HTC Corp., Samsung Electronics Co. and Huawei Technologies Co.

Windows 8 is Microsoft's first operating system designed to work across traditional computers, tablets and smartphones. Although Asus has made mobile phones on and off for years it has so far failed to progress beyond a marginal player in the market. Most recently, a partnership with U.S.-headquartered GPS company Garmin Ltd. on Windows and Android phones petered out in 2011 because of stiff competition and the popularity of Google's free navigation system, Mr. Lin said.

Last April, Asus launched the Padfone, a line of high-end mobile phones that dock into a tablet. Chairman Jonney Shih said in the interview at the company's Taipei headquarters that the mission to create a phone that could compete with Apple Inc.'s iPhone 5 and Samsung's Galaxy Note preoccupied Asus' highest level executives in hundreds of meetings, many stretching past midnight, as they strove to reposition the company for the shift toward mobile.

"Inevitably, computing will not only be limited to the PC," said Mr. Shih. "We have to be prepared for that."

The second-generation Padfone launched in October is a 4.7-inch Android phone that docks into a 10.1-inch tablet. The Padfone 2 has a slightly lower screen resolution than the iPhone 5 but a higher resolution camera, and sells for NT$19,901 (US$686) in Taiwan.

Wanli Wang, an analyst at RBS said the market for a phone that docks into a tablet is limited, and he questioned the company's ability to increase its brand recognition in a market dominated by big names like Apple and Samsung.

To gain more ground, Asus will start selling the Padfone 2 in China next month, Mr. Lin said, as part of its goal to increase its smartphone sales by "several times" this year to more than 1 million.

The global smartphone market numbered 717.5 million units in 2012, according to IDC. Asus currently sells its phones in 20 countries in Europe and the Asia Pacific.

Write to Eva Dou at Eva.dou@dowjones.com

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