Microsoft's Bing Improvements, Phone 7, Windows 7 Dominated Week

Microsoft's week demonstrated its strengths and weaknesses in abundance. While the company touted sales of 150 million copies of Windows 7, its desktop-based flagship, rumors abounded that it was attempting to pay iPhone app developers to port their wares onto the upcoming Windows Phone 7. Windows Live Essentials and the new Bing "Entertainment" tab show how Microsoft is approaching the cloud for both consumers and business users, but indications are that the company overall is still trying to figure out its overall cloud strategy, particularly as it applies to endeavors such as smartphones.

Microsoft's week seemed in many ways to encapsulate its marketplace position: Even as the company announced 150 million copies of Windows 7 sold since the operating system's October 2009 release, reaffirming its primacy of the desktop, rumors abounded of its attempts to gain traction in the cloud and smartphone space, where it faces substantial competition from the likes of Apple and Google.

"Windows 7 is the fastest selling operating system in history, with seven copies of Windows 7 sold every second," Brandon LeBlanc, a spokesperson for Microsoft, wrote in a June 23 posting on The Windows Blog.

In previous earnings calls, Microsoft executives suggested that Windows 7 is doing well among consumers. Business spending on software, by contrast, has only recently begun to revive after a long global recession. The likely hope within Redmond is that Office 2010, which was recently released to both consumers and businesses, will generate similar sales numbers; in order to increase the adoption rate, Microsoft has struck deals with some of its manufacturers to preinstall a stripped-down version of Office 2010 on their new PCs, with the option to unlock the full version with a product keycard.

But while it holds a dominant share of both the operating system and productivity-software markets, other signs from this week indicate that Microsoft is still trying its best to create a viable consumer smartphone strategy that will let it compete more effectively against Apple's iPhone and the rising challenge from Google Android devices: The prevalent rumor drifting around is that Microsoft has been offering to pay developers of popular iPhone applications to port their wares onto the upcoming Windows Phone 7 platform, which Microsoft intends as a total reboot of its mobile franchise.

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One developer reportedly told the Website that Microsoft had approached his colleagues about making their iPhone games compatible with Windows Phone 7. According to the June 21 article, the monies involved were said to be "substantial."

Microsoft declined to comment directly on the rumors.

"We are working closely with a wide range of developers on mobile applications," a Microsoft spokesperson wrote in a June 21 e-mail to eWEEK. "We offer developers support and resources such as hardware, tools, technical support, design assistance and in some cases limited financial support, most commonly in the form of an advance on revenue."

Windows Phone 7 presents a rather unique take on the smartphone user interface, collating applications and Web content into subject-specific "Hubs" such as "Office" or "Games." Microsoft will pair the smartphone operating system with a new Windows Phone Marketplace, where developers will be able to submit five free applications (rising to $19.99 after that) along with an unlimited number of paid applications.

While Microsoft allegedly pushes developers for games, it has also attempted to sell, to enterprise customers, the idea of Windows Phone 7 as a business device.

"More than 90 [percent] of our target customers for Windows Phone use their smartphone for business purposes," Paul Bryan, a senior director of Windows Phone at Microsoft, wrote June 7 on the Windows Phone Blog, timed to the first day of the company's TechEd conference, "and 61 percent use their phones equally or more for business than personal use. This is why we designed Windows Phone 7 to combine a smart new user interface with familiar tools such as PowerPoint, OneNote, Excel and SharePoint into a single integrated experience via the Office hub."

Microsoft's cloud-based initiatives extend to other areas. On June 24, the company rolled out its new beta for Windows Live Essentials, offering up a variety of services for photo sharing, blogging, e-mail and document productivity. Cloud-enabled features include the ability to share photos and video among contacts, organize e-mail contacts, and synchronize files across multiple PCs.

Microsoft also updated its Bing search engine with an Entertainment tab, which leads to a page with separate tabs for Music, Movies, TV, Games and Video Games. Previous additions to Bing seemed more focused on increasing its search-related functions, the better to compete with Google; this new one, by contrast, seems more angled to make Bing a Web portal akin to Yahoo.

"In this release of Bing one of the biggest investments we are making is in the area of entertainment," Yusuf Mehdi, senior vice president of Microsoft's Bing unit, wrote June 22 on the Bing Community blog. "Working with key groups inside Microsoft that have deep entertainment heritage, we've made significant investments in four key areas: Music, Gaming, Movies and TV. Our focus was on making it easy-if you can type in a search box, you can have a great entertainment experience on Bing."

With music, typing in the name of an artist or band will return lyrics, photos, videos and streaming songs via Microsoft's Zune service; the gaming section allows casual games to be played free via Bing's page; the Video Games section provides cheats and walkthroughs for console and PC games such as "Red Dead Redemption"; and the TV section offers full-length episodes from over 1,500 shows.

The evident hope is that augmentations like an Entertainment tab will allow Bing to continue its slow growth-right now, the search engine occupies between 9.43 and 12 percent of the market, in contrast to Google's variously estimated 66 and 72 percent.

In a March 4 speech at the University of Washington, Microsoft CEO Steve Ballmer indicated that the cloud would influence Microsoft's strategy going forward.

"Companies like ours, can they move and dial in and focus and embrace?" Ballmer asked an audience comprising primarily students. "That's where we're programmed. You shouldn't get into this industry if you don't want things to change. The field of endeavor keeps moving forward."

But Microsoft is also trying to figure out how to best articulate a sizable revenue stream from the cloud; most of its current services, such as Web-based Office applications and the Windows Live Essentials beta, are free of charge. For the time being, that means Microsoft's traditional area of strength-the desktop-also presents its best way of making money. Good thing Windows 7 sold 150 million copies.