re: Hello! Whats Shakin? (Convergence Battles)
>> A Hard Cell For Microsoft
March 7, 2002
BusinessWeek
News Analysis
businessweek.com
Redmond is determined to get its new software into 25% of mobile phones worldwide. Good luck.
Steve Ballmer wants to get inside your cell phone. In December, the Microsoft (MSFT ) CEO ordered the company's wireless group to begin reporting directly to him. And in the past few weeks, he has further intensified his focus on the division, says Juha Christensen, Microsoft's vice-president for mobility.
"The strategy is really to remove the black magic that surrounds the making of the mobile phones," says Christensen. And do to the cell-phone software sector what Redmond has done so well in the PC business -- turn code into a cash cow.
The vociferous Ballmer -- who once had surgery to repair his vocal chords after damaging them by yelling at a company pep rally -- hopes that by 2005 a quarter of all cell phones will feature Microsoft software. That's an ambitious goal for a company that has zero market share now. Worse, Microsoft's reputation as a brutal competitor willing to do anything to dominate a market precedes it.
Cable Rerun?
Cell-phone network operators are wary of letting Microsoft exert too much influence over their business. Likewise, leading handset makers, such as Nokia, view Ballmer's quest as a crusade to take control of their customers. The upshot? Microsoft has an uphill battle ahead of it (see BW, 3/11/02, "Will Microsoft Overplay Its Wireless Hand?").
Skeptics point out that this cell-phone push echoes the company's attempts to be a player in cable television. Microsoft has long sold software for interactive set-top boxes. Despite sinking $10 billion into big cable companies such as AT&T Broadband in hopes of getting a leg up in that business, Microsoft remains a marginal player, says Ken Zita, a telecom consultant in New York. That lack of success is due in part to cable companies' fear that Microsoft would try to dictate prices and lure away their customers, says John McPeake, an analyst with Prudential Securities.
Microsoft could stumble again. As the world's largest cell-phone supplier, Nokia alone presents a huge barrier. The Finnish company, which sold 140 million of the 400 million mobile phones purchased worldwide in 2001, exerts considerable influence in the industry. It has also started licensing the code that runs its popular phones and announced a deal with chipmaker and lead supplier Texas Instruments to make standard hardware for other manufacturers willing to use its code.
Underdog Role
Industry insiders say Nokia, which didn't return requests for comments, has no intention of letting Ballmer's crew into the game. In this instance, "it's the equivalent of Hyundai taking on GM," says Ed Snyder, an analyst with JP Morgan H&Q, of Microsoft's nascent efforts to take on Nokia. The underdog role is one Microsoft is unaccustomed to playing.
And so far Gates & Co. is fighting a losing battle to get key alliances with cell-phone chipmakers and handset manufacturers. Although Microsoft announced deals last month with both Intel and Texas Instruments, they may not be significant. Intel is a relative newcomer in the cell-chip business, and among Nokia's numerous alliances is one with TI. Redmond needs the kinds of ties Nokia has to gain critical mass in the business.
Thus far, only one cell-phone maker, British-based Sendo, plans to use Microsoft software in the near future. (Microsoft bought a small chunk Sendo, which denies that it had any bearing on its decision.) Sendo designs its own hardware, according to Ron Schaeffer, head of product strategy for the company. "Typically, a design done in-house would have better integration, fewer components, and lower power consumption," he points out.
.NET Strategy
Microsoft might be able to leverage its dominance in the corporate e-mail market to create easier access to internal messaging systems using its Web-surfing, data-friendly handset software, Smartphone. And reduced integration costs between cell phones and corporate e-mail could be a big plus for Ballmer.
Still, "I don't think it's in anyone's interests to let Microsoft dominate the handset environment," says Andrew Cole, an analyst with wireless consultancy Adventis. Whatever Microsoft comes up with "could be the most exciting thing in the world, but [the handset makers] still wouldn't want it."
The stakes are high. Breaking into this industry could play a key role in Microsoft's .NET strategy, which is centered on accessing information or executing transactions anywhere on any platform. And Microsoft claims that if Ballmer's three-year plan is successful, the company will receive 2% of its total revenue from cell-phone software. And that could be just the start if the wireless data business explodes in the next few years, as many analysts are predicting.
Clearly, Microsoft has the resources to undertake a sustained run at Nokia & Co. And Ballmer, who is a jogger, is known to accelerate whenever he's going uphill. The question is: How fast and how long he can run this time? <<
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>> Will Microsoft Overplay Its Wireless Hand?
March 11, 2002
Andy Reinhardt
BusinessWeek
International Business
Commentary
businessweek.com
If there is one technology in which Europeans can claim superiority, it's mobile phones. Through a mix of uniform standards and technical prowess, operators like Vodafone Group PLC (VOD ) and suppliers like Nokia Corp. (NOK ) dominate the wireless scene. But the Americans figure it's the moment to seize the advantage. That's because mobile phones are becoming more like computers, and wireless systems are merging with the Internet--areas where the U.S. excels.
Among the gate crashers, none is causing more consternation than Microsoft Corp. (MSFT ) The software giant made a huge splash at a mobile-phone convention in Cannes in mid-February. In meetings aboard its private yacht, it talked up an alliance with chipmaker Intel Corp. (INTC ) to define the next wave of high-end, Web-enabled mobile devices. It was a clear challenge to the handset makers, especially industry leader Nokia, which aims to maintain its influence over the wireless Net. Microsoft contends phones using its software will be more powerful, flexible, and user-friendly than any other system. "The mobile world is moving from voice to data, and data is what we understand best," says Ben Waldman, Microsoft's vice-president for mobile devices.
The giant from Redmond, Wash., is a force to be reckoned with. But this bid by Bill Gates to replicate his PC success faces daunting odds. True, Microsoft has scored a hit in the fast-changing videogame business with its Xbox console and has clawed its way up to a 21% share of the still-nascent handheld computer market. But it has had a lot less luck breaking into established businesses like office equipment and cable television. One common critique: Its software tends to be unwieldy and incompatible with prevailing standards.
The biggest obstacle to Microsoft's wider aspirations is the mistrust it engenders among potential customers. Mobile-phone makers are no exception. They have watched the software giant gobble up most of the profits in PCs and fear the same result in handsets. Says one telecom exec: "Everybody hates Microsoft."
Such hatred is not stopping the famously persistent company. Microsoft argues that it's better positioned than its rivals to offer an open platform on which third parties can create their sexy new wireless applications. "We're democratizing handsets," says Waldman.
Yet smart spin can't make up for the fact that Microsoft is the Johnny-come-lately of wireless. The company is racing to make up for lost time with appealing new products, including stripped-down versions of Windows designed specifically for cell phones and handhelds. These operating systems, called Smartphone 2002 and Pocket PC 2002, are chock-full of goodies such as Web browsing and support for digital music and photos. But software glitches have delayed the introduction of the first handset to use Smartphone software for more than a year. The snazzy color-screen phone, from British startup Sendo, likely won't ship until the middle of 2002, and a price tag of $500-plus could well limit sales. So far, none of the European majors has announced plans to use Smartphone 2002. One reason: Even pared-down models need eight times as much memory and processing power as today's handsets.
An even larger stumbling block may be Microsoft's own oversized ambitions. Even if the company achieves its goal of getting inside 25% of the world's handsets within three years, annual revenue from selling its software might amount to only 2% of overall sales. The serious bucks have to come from sales to phone companies of Microsoft's big-ticket software and services for running wireless data systems. The handset business "is only a beachhead," says Tim Daubenspeck, an analyst at SG Cowen & Co. in London.
Mobile carriers Vodafone, Telefónica Móviles, T-Mobil, Orange, and mm02 have announced deals with Microsoft, though the extent of the relationships isn't known. But many are wary of casting their lot with the behemoth. The fear is that Microsoft could start siphoning away some of their revenues by offering its own wireless services such as portals, messaging, and online content. If Microsoft pulled mobile users over to its MSN instant-messaging service, wireless operators could see billions of dollars a year in text-messaging business slip away.
Nokia, of course, is also competing with its customers by luring consumers to its Club Nokia wireless portal. But the Finnish company has a lot more experience delivering the equipment and services that carriers want and need. And that's the problem for Microsoft. Its potential customers have a viable alternative to the Gates vision. Unless Microsoft learns to play by the industry rules, it could leave the party empty-handed.
Reinhardt covers European technology from Paris <<
- Eric - |
