Microsoft aims to get back in the game in mobile

Cliff Edwards and Olga Kharif
BusinessWeek
Just a few years ago, Microsoft looked like a real contender in the mobile-phone market. Its Windows Mobile operating system ran about a quarter of all smartphones as recently as 2004, and it was gaining ground on leaders like Nokia. Then Apple and BlackBerry maker Research In Motion left the software giant in the dust. On Feb. 15, at a wireless industry conference in Barcelona, Microsoft will unveil its latest effort to get back into the game. The renamed Windows Phone operating system will "move the bar forward, not in an evolutionary way," promises Robert J. Bach, president of the company's entertainment and devices division.
 
Microsoft needs to be a player in the smartphone market. The computing people used to do on personal computers, where Microsoft has a lock, is migrating to mobile devices. Apple's iPhone, RIM's Blackberry, and other phones are becoming the preferred way to read e-mail, check out Facebook, or catch up on the news. Researcher IDC predicts the total shipments of smartphones will more than double between 2009 and 2013, to 391.3 million units. Microsoft's new mobile software "has to be different and convince their customers and partners that they are going to fundamentally change direction," says IDC analyst William Stofega.
 
New, integrated software
Microsoft's new software is much improved and has the advantage of easily handling word processing and spreadsheets sent from PCs. It will also be more integrated with the company's Xbox game machine and Zune music player, so users can share music and videos among Microsoft devices. But that won't solve another challenge the company faces in attracting customers. Independent software developers who create new applications for mobile phones have mostly ignored Microsoft and focused instead on the iPhone and Google -backed Android phones. Developers have cooked up more than 140,000 apps for the iPhone, available through Apple's iTunes. There are about 800 available in Microsoft's online mobile store, though the company estimates 20,000 applications will run on its mobile operating system. "They've never really established a brand presence that's meaningful," says analyst Charles S. Golvin of Forrester Research.
 
Some industry analysts say the Redmond (Wash.)-based company should dramatically change course. It could opt to brand its own phone, like Google did, or strike a strategic partnership with a power player like Nokia. Several think it should make a major acquisition. "The logical thing for them to do would be to buy someone," says Richard Doherty, co-founder of consultancy Envisioneering.

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