Attitude Adjustment

Microsoft's strategy spans wireless space

Microsoft has been taught some unpleasant and embarrassing lessons in the wireless world.

But after early failures, the software company has swallowed its pride and is steadily on its way to becoming one of the most important suppliers of mobile software infrastructure.

Microsofts first impulse, industry observers and even some Microsoft executives say, was to trundle into the offices of hardware manufacturers and tell them exactly what the mobile landscape — based, of course, on Microsofts products — would look like.

"The biggest problem for Microsoft has been early arrogance in the area," says Ken Dulaney, vice president of mobile computing at Gartner Group. "They assumed everyone would flock to them."

Now, its Wireless Strategy 2.0 for Microsoft. These days, a more contrite Microsoft, perhaps cut down to size due to the governments antitrust lawsuit, is more willing to collaborate.

Microsoft executives concede that some of its earlier attempts to produce mobile computing software were disappointing, but insist theyve learned from the experience. "Two or three years ago, we were saying, "Weve got this device space figured out," says Scott Gode, director of marketing at Microsofts Mobility Group. "Now Microsoft is very pragmatic and forward-looking in this space."

What Gode means is that Microsoft will offer technology and services that span the entire range of the wireless space — including device software, server software, content and applications, and even the tools to create content for wireless devices. It will also develop its products to work with those from competing vendors.

"Our aggressiveness to say we have a solution for every part of the mobile chain doesnt mean were ignoring installed bases, whether that means tapping into data in an Oracle database or serving data to a RIM [Research In Motion] device," Gode says.

The many-tentacled creature that is Microsoft is pursuing the wireless Web in three broad areas:

DEVICES: One of the companys historical strengths has been Windows, the dominant end-user interface and the operating system people use to access and create digital information. In the wireless realm, Microsofts instinct is to "own the client" and become the leader in providing similar software for mobile devices of all shapes and sizes. The companys two main mobile platforms are Pocket PC — the revamped version of Microsofts handheld OSes introduced last year — and the Microsoft Smart Phone Platform, code-named Stinger, designed for phonecentric devices that also provide data access features. Microsoft also offers Mobile Internet Explorer, browser software intended for phone manufacturers to use in mobile handsets that cant accommodate the Stinger code.

SERVERS: Mobile Information Server, code-named Airstream, is Microsofts attempt to provide the link between data that resides on wired networks — such as e-mail on a Microsoft Exchange server sitting in a companys headquarters — and the end users wireless devices. Microsoft says the first official release of Mobile Information Server should ship in the first half of this year.

CONTENT AND APPLICATIONS: MSN Mobile is a free "wireless portal" that serves up news and information from MSN — as well as access to Web-based applications such as Hotmail — and is designed for Web-enabled phones and handhelds.

An important truth about the wireless Web is that, contrary perhaps to Microsofts wishes, there will not be a single player dominating the field.

Among wireless device makers and carriers, a wariness about Microsofts reputation of bullying tactics has worked to the companys detriment, analysts say. Some consumer electronics companies remain reluctant to work with Microsoft. "Vendors just dont want Microsoft to dominate this space, and theyre doing everything they can to work around it," Gartner Groups Dulaney says.

Such sentiment has helped mobile software competitors such as Palm and Symbian, a consortium formed by U.K. handheld vendor Psion and several mobile phone manufacturers. Openwave Systems, formed by the merger of and, also provides Web minibrowser and e-mail technology for mobile phones.

Multiple Partners

Mobile device makers are hedging their bets and developing products with software from multiple vendors. Ericsson, for example, is one of Microsofts top partners in the wireless industry. The two companies have established a joint venture to develop e-mail software for wireless carriers; Ericsson is also using Microsofts lightweight browser in one of its mobile phone models. But Ericsson is also a founding member of Symbian and has incorporated Symbians EPOC OS into another of its phones.

Ed Suwanjindar, a product manager at Microsofts Mobile Devices group, says device makers will inevitably proceed with multiple software partners in the early stages of the wireless data market. But, he says, Microsoft now has a flexible array of software and tools to better serve those customers.

The company was forced to overhaul its mobile computing strategy because devices based on the earlier Windows CE OS were getting killed by Palm. Initially, Microsoft hoped to extend the desktop PC experience to a mobile device by stuffing the desktop version of Windows into a tiny little gadget.

"There was some thought that some kind of master device form factor would emerge," Suwanjindar says. "But that hasnt been the case. We dont think there will be one single device that speaks to the whole breadth of users."

About a year and a half ago, Microsoft sat down and reconsidered what actually made sense to have in a mobile device.

The launch of Pocket PC, with its improved interface and multimedia features, received some favorable attention. But it was Compaq Computers iPaq Pocket PC, introduced last summer, that may have rescued Microsofts mobile strategy, Dulaney says. Until Compaq shipped the hot-selling iPaq, which features a high-resolution color screen and a relatively powerful processor, Microsofts mobile initiatives were on the brink of disaster. "The iPaq made a huge difference," Dulaney says. "Compaq pulled them back from the precipice."

Palm enjoys a serious lead in the handheld computing segment, and it will probably remain ahead. Palm OS-based handhelds represented 75.9 percent of the market in 2000, while those running Microsoft Pocket PC held 16.5 percent, according to International Data Corp. "Pocket PC made a jump, but theyre still trailing — and they will trail for a long, long time," says IDC analyst Kevin Burden, who tracks the handheld devices market.

Palm, however, may itself be at a critical juncture. In January, Chief Technology Officer Bill Maggs left the company to pursue another venture — right in the middle of important development work on a new version of the Palm OS to help it stand toe-to-toe with Pocket PC.

Pam Deziel, director of platform product marketing at Palm, says the company is well on track to deliver new software that meets the changing needs of mobile information devices. In April, Palm plans to release version 4.0 of its OS, which adds support for global system for mobile communication (GSM) and Code Division Multiple Access (CDMA) wireless networks, Deziel says. The latest released version of Palms OS, version 3.x, natively supports only Mobitex wireless networks; however, some Palm partners, including Handspring, have developed hardware that works with other wireless networks. Future iterations of the Palm OS will run on fast processors designed by ARM and provide audio and full-motion video support.

On the smart phone front, a serious competitor to Microsoft may be Symbian. Symbians EPOC platform has been licensed to an impressive list of players in the info-gadget biz, including Ericsson, Matsushita Electric Industrial, Motorola, Nokia, Philips Electronics, Sanyo, Siemens and Sony, says Trevor Strudley, Symbians director of partner management.

"Theres only one player who is working with all the tier-one [mobile phone] players, and thats Symbian," Strudley says. He adds that phone makers prefer Symbians licensing model, which is publicly disclosed and uniform to all licensees: a $10 royalty per unit for smart phones. Neither Microsoft nor Palm disclose software licensing terms.

Back-End Advantage

But microsoft says it has advantages over Symbian — and any other wireless technology supplier — because it can tie mobile devices into back-end corporate data. Microsofts software is pervasive in businesses information technology infrastructure; the idea is that Microsoft is the best vendor to be able to figure out how to extend that infrastructure to mobile users.

"There are a lot of people out there that make great software to run devices," Suwanjindar says. "But as these devices become enabled for wireless connectivity, theres a lot of infrastructure that needs to be in place. Its not rocket science what people want on these devices — its corporate e-mail and their documents. And that runs on Microsoft software."

So the server side of the wireless equation is of utmost importance to Microsoft, even though its been less visible than Pocket PC and Stinger. However, compared with competitors, Microsoft is late to market with its Mobile Information Server, as Chief Executive Steve Ballmer recently acknowledged. Its as much as two years behind similar offerings from IBM, Oracle and Sun Microsystems. Despite Microsofts tardiness — its wireless server is due out by midyear — analysts say its Mobile Information Server, which will provide access to a Microsoft Exchange server from wireless phones, should have a strong appeal to corporate customers.

Now, Microsoft must line up more hardware partners. Two weeks ago, the company announced two new design wins, though they are with relatively small phone suppliers: Mitsubishi Electric and Sendo, a mobile phone maker in the U.K., say they have licensed Microsofts Stinger smart phone platform for future products. Previously, only Samsung had committed to developing a product based on Stinger. Licensees for Pocket PC include Compaq, Casio, Hewlett-Packard, Sagem — a French manufacturer that plans to roll out a GSM-based phone that incorporates Pocket PC — and Siemens.

But will the aversion some device makers have to working with big, bad Microsoft subside? Microsofts Gode says the company will have to win the trust of hardware manufacturers and prove itself as products based on its mobile software hit the market.

"Just like with any relationship, its spending time working with the manufacturers and sharing joint development initiatives," Gode says. "Its not Microsoft coming in and saying, Here is the way of the world. Were acknowledging the expertise [partners] have in the hardware space, and were adjusting our plans to meet what they believe customers want."