Microsoft push into mobile just beginning

Microsoft's mobile efforts are facing a critical stretch. After a lull in activity, the company this week formally announced a marketplace for mobile applications, a new backup-and-restore service and the latest version of its mobile operating system. The plans were aired at Mobile World Congress, the biggest trade show for the wireless industry, taking place in Barcelona, Spain.

Several of these efforts emerged in media reports earlier this month. Executives say this is just the beginning.

"You're going to see from us over the next 24 months, probably more innovation than you've seen in the last, I'd say, three or four years in the Windows Mobile space," said Robbie Bach, president of Microsoft's Entertainment and Devices Division, which includes the mobile efforts.

The company is looking to wrest back some of the mind-share in the mobile marketplace from Google, which launched a mobile operating system last year, and Apple, whose iPhone has become the poster-gadget for powerful, Internet-connected phones that are essentially pocket computers.

Indeed, one of the hottest areas for software developers is mobile applications, and Apple has, so far, created the most extensive marketplace for selling them.

Microsoft executives note that mobile is a huge market that's still relatively young and up for grabs.

Bach, talking to students in Redmond, Wash., last week, said a billion phones are sold around the world each year.

"What it does for us from a business perspective is create tremendous opportunities," Bach said.

He said the next two generations of Windows Mobile - 6.5 just announced, with 7 set to come in 2010 - will have improvements to the user experience, including a greater emphasis on touch controls; "dramatically better" mobile Web browsing (the company announced a new version of Internet Explorer mobile in January); expanded music, video and other consumer-oriented capabilities; and connections to Web services such as Facebook and Twitter.

Microsoft's mobile executives also realize this is an important period for the industry and the company's place in it.

"What happens in the next three years is what's going to define the next 10," said Scott Rockfeld, director of Microsoft's Mobile Communications Business. "And we're truly scratching the surface on what's possible these days."

Some observers are comparing it with the early days of the personal computer industry when Microsoft, IBM and other players jockeyed to attract the most users and application developers to their platforms.

"This is actually the battle of the developers' mind share," said Satoshi Nakajima, who was at Microsoft for 13 years ending in 2000 and now runs Big Canvas, a small Bellevue, Wash., application developer making on-the-fly photo-editing applications for the iPhone. "I can tell you that at this moment Apple is the clear leader, and just like anybody else, I'm watching Google and Microsoft."

Microsoft sent CEO Steve Ballmer to lay out the strategy at the Mobile World Congress. Ballmer first spoke to the industry at that event three years ago, assuring the audience, "We come as a friend."

The landscape has changed dramatically since then.

Most notably, Apple launched the iPhone and has stolen the thunder in the smart phone market. According to research firm Canalys, the iPhone accounted for 17.3 percent of worldwide smart phone shipments in the third quarter, surpassing Microsoft, which had 13.6 percent.

Microsoft licenses its mobile-operating-system software to third-party phone manufacturers such as Sony Ericsson and HTC. The mobile-operating-system market leader in the third quarter was Symbian, with 46.6 percent.

Rockfeld said Apple's success in the smart phone market has helped the rest of the industry.

"They are the new guy," he said in an interview last week. "They definitely raise the awareness of what smart phones can do, so that's actually benefited all of us and has benefited the industry."

Applications for everything from finding a restaurant to turning the iPhone into an instrument have helped fuel its growth since Apple launched the App Store last year. Microsoft's application marketplace would be an important step to compete for the developers' attention.

Nakajima said the lack of a clear, easy channel through which to sell his mobile applications is currently the single biggest factor keeping him from developing for Windows Mobile.

"I know the pain of selling (applications) through wireless operators," he said. "... The fact that they control the store makes it so difficult and expensive for us to sell."

Apple solved that problem with the App Store, built on its existing iTunes media store. It's easy for developers to upload their applications and easy for consumers to buy them, Nakajima said. "It's a truly open market, and it's worldwide," he said.

Microsoft will have to match that ease of use and worldwide scope if it wants Nakajima's attention.

If not, "I'm going to again postpone my support of Microsoft," he said. "They have to solve this problem."

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