Microsoft's Week: Mobile 6.5 Launch, Ozzie's FUSE and Bing Drops

Microsoft had a busy week, one that saw the launch of its new mobile operating system, Windows Mobile 6.5. Microsoft CEO Steve Ballmer used a European trip to downplay Windows 7 ahead of the much-anticipated operating system's Oct. 22 release. And chief software architect Ray Ozzie highlighted the future importance of social computing by starting FUSE Labs, designed to quickly exploit developing trends in connectivity software and services.

Microsoft's big news this week was the Oct. 6 release of Windows Mobile 6.5, the newest update of its mobile operating system. If recent comments by Microsoft CEO Steve Ballmer are any indication, Mobile 6.5 is intended as a sort of placeholder, one that will potentially allow Redmond to gain a few points of market share before the release of Mobile 7 in early 2010.

Windows Mobile 7's exact features and interface continue to be a closely guarded secret, but indications are that it will be a major update, one that will let Microsoft perhaps compete more heartily against the iPhone and the Palm Pre. Ballmer opined during September's Venture Capital Summit that Microsoft "screwed up" Windows Mobile and that he wished Mobile 7 had already been launched.

During Microsoft's Open House event in New York on Oct. 6, Robbie Bach, president of Microsoft's Entertainment & Devices (E&D) Division, suggested that the company will have 30 new phones running Mobile 6.5 by the end of 2009. Various manufacturers and carriers, including HTC, Sony Ericsson, AT&T and LG Electronics, announced new smartphones running the operating system.

Over the summer, Microsoft encouraged developers to create applications for Windows Marketplace, its competitor to Apple's App Store, in the hope that they could launch Mobile 6.5 with around 600 apps in place. Instead, Marketplace launched with 246 applications from more than 753 ISVs (independent software vendors).

Click here for more information on Windows Mobile 6.5's full capabilities.

Even as Microsoft pumped the rollout of Mobile 6.5, Ballmer sought to temper anticipation for Windows 7, the new operating system due to be generally released on Oct. 22.

"There will be a surge of PCs, but it will probably not be huge," Ballmer told a news conference in Munich, Germany, on Oct. 7, according to a Reuters report. At the same time, Ballmer acknowledged that the tech sector, hard hit by the long-running economic recession, will only spring back gradually.

Microsoft's own fortunes depend heavily on Windows 7, as well as the other new versions of its flagship products, being a success. For the fourth quarter of fiscal 2009, Microsoft reported a 17 percent decline in year-over-year revenue, with earnings of $13.10 billion that came in $1 billion below Wall Street estimates. Microsoft's next quarterly results will be reported on Oct. 23.

Microsoft is offering Windows 7 Enterprise in a free 90-day trial edition, in the hopes that it will help increase the appeal of the operating system in the enterprise. Various surveys over the summer seem divided as to whether the majority of businesses will quickly move to adopt Windows 7 or refrain until later in 2010.

Redmond also hinted at its broad future strategy with the creation of Future Social Experiences (FUSE) Labs on Oct. 8. A combination of Microsoft's Massachusetts-based Startup Labs, along with the company's Creative Systems Group and Rich Media Labs, the new endeavor will focus on "software and services that are centered on social connectivity, real-time experiences, and rich media," according to a Microsoft Website.

The Labs will include over 80 employees and be headed by Lili Cheng, previously the director of the Creative Systems Group within Microsoft Research. The restructuring shows the importance, in Microsoft's eyes, of social computing platforms and applications, not only for leisure pursuits but also business communication and collaboration.

In an internal memo, Microsoft's Chief Software Architect Ray Ozzie said FUSE Labs will "bring more coherence and capability to those advanced development projects where they're already actively collaborating with product groups to help them succeed with 'leapfrog' efforts."

That quickness in responding to changes in the IT landscape is likely necessary if Microsoft wants to continue competing against Google and other companies with a track record of deploying new products quickly to market. Microsoft's most directly competing product to Google, its Bing search engine, saw its U.S. market share slip in September by over a point to 8.5 percent, according to analytics firm StatCounter. Another report from statistics firm Net Applications saw a similar slight dip.

While those numbers are likely not worrying to Microsoft, it underscores Redmond's need to find a way to leverage its beachhead in the search arena, particularly as the multimillion-dollar ad campaign that accompanied Bing's launch winds down.