Lot's of interesting stuff is about to happen in the cell phone market, that raises more questions than answers. First question I have is will most folks even want a complicated 3G phone. My second question is will the winner be cell phones with added features, or will they come from the other direction, handheld computers with cell phone functions. Huge unit sales and lots of money on the line, for many companies. A pretty good article:
Microsoft's Mobile Devices Strategy Starts To Connect
By: Gren Manuel, Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Snubbed as a partner by Europe's giant mobile phone makers, Microsoft (NasdaqNM: MSFT - news) Corp (MSFT) is finally making headway in its plan to get its software installed in the new generation of mobile devices known as smartphones - combining the functions of phones and computers.
A string of announcements on both sides of the Atlantic shows the U.S. -based software giant is winning friends and influencing second-tier manufacturers and network operators with a product that some analysts say could lead to a complete redrawing of the economics of the handset market.
" Microsoft 's aim is to destroy Nokia's (NOK) high margins in mobile phones and leave the mobile phone makers with a low-margin hardware business," says Bill Lesieur, industry analyst with Technology Business Research of New Hampshire , U.S. "Nokia has one of the strongest brands in the world, so Microsoft needs to dilute the brand power by getting mobile operators to adopt the use of private label phones."
Jessica Figueras, an analyst with Ovum in London says: "They certainly seem to be getting somewhere, finally," pointing particularly to a broad-ranging deal struck March 13 between Microsoft and Deutsche Telekom AG (DT) that means the German operator, Europe's second largest mobile phone company, will offer its customers smartphones powered by Microsoft 's Pocket PC software. This is a version of Microsoft Windows shrunk to fit a handheld computer with extra facilities to reflect its palm-top role, such as software to make and receive mobile calls.
With the PC industry at saturation, Microsoft and other participants in the PC field are already crowding into the smartphone market, enticed by predictions such as that of researchers IDC who believe that in western Europe this type of device will be a $14.5 billion market, with 30 million devices sold - in 2001 that figure was just 480,000.
Although still a small part of the mobile market in terms of unit sales, it's the fastest-growing and potentially most lucrative sector.
But Microsoft also sees mobile devices as a key part of the company's broader strategy of providing Internet-powered services that can be used both on the move or on a PC using the software technology known as .NET.
Robbie Wright, Microsoft 's director of mobility marketing for Europe, Middle East and Africa, says: "We are making a strategic bet that people don't want two Internets."
The risk for Nokia Corp. (NYSE: NOK - news) , the mobile handset venture operated by Ericsson ( ERICY) and Sony Corp (SNE), and others who dominate the mobile phone industry is that, like PC makers before them, with software becoming increasingly important, the hardware could become standardized. They could then find themselves competing only on price with much of the profit going to Microsoft or whichever company makes the software.
"The big manufacturers are going to keep Microsoft out as long as possible," says Ovum's Figueras. "Nokia, Sony Ericsson, Motorola - that lot are never going to let Microsoft in."
Yet Microsoft 's recent deals, analysts reckon, show that Microsoft is executing a pincer movement, outflanking the big handset makers.
As well as Deutsche Telekom, the U.K.'s mmO2 PLC (OOM) is to offer a Microsoft -powered phone in the next few weeks. It's typical of the new breed of smartphone: a silver-cased, high-featured gadget weighing 201 grams with a high- quality color screen and flip-open top that can be used as a phone, a pen- powered computer, or a wireless Internet device.
It will run cut-down versions of the Outlook, Word, Excel and Internet Explorer programs and will go on sale in May across Europe for between EUR650 and EUR800, called the mmO2 xda.
March 18 Microsoft announced that Verizon Wireless (X.CRZ), Cingular Wireless (X.CIW), and VoiceStream would also be offering Microsoft -powered phones.
In addition, early February Microsoft announced a tie-up for mobile devices with Intel Corp. (NasdaqNM: INTC - news) (INTC), its partner in dominating desktop PCs, and another with Texas Instruments (NYSE: TXN - news) Inc (TXN). Together they will produce what amounts to a kit of parts to make it easier for second-level phone makers to develop the kind of high-end phones previously the preserve of the industry's biggest participants.
Microsoft 's Wright denies that Microsoft is overtly trying to outflank the major manufacturers by going directly to operators, saying that it has talked to everyone in the business and is simply working with those who have responded.
"This is not a plan B," he says.
Microsoft 's strategy is only possible because of a new breed of phonemaker that has been smart enough to design and build powerful, portable devices based around Microsoft 's software but doesn't demand its name on the front.
Among them is HTC Corporation of Taiwan , which already makes Compaq Computer (NYSE: CPQ - news) Corp.'s (CPQ) runaway hit of a pocket PC the iPaq, and is about to list on the Taiwan bourse. Although almost unknown in the West, it has Qualcomm Inc (NasdaqNM: QCOM - news) (QCOM) as a 1% strategic shareholder and numbers ex- Microsoft staff among its development team.
HTC designs and builds for mmO2 - but the name on the front will be mmO2's - and HTC says it is quite happy with the deal.
"We don't want to use HTC as a brand," says Martin Liu, special adviser to the president.
Sendo PLC of the UK is another that is working with Microsoft and selling Microsft-powered phones to Cingular in the U.S.
Marijke Van Hooren, director of corporate communications, says with 600 mobile operators worldwide finding it difficult to stand out from the crowd on services, they are increasingly wanting to differentiate themselves with handsets.
"You need something to differentiate yourself with. With Sendo you can have an exclusive model with customized software and screens," she says.
Analyst say Microsoft is poised to benefit from the tension between network operators and handset makers. While both need each other financially, operators have long resented the fact that their own brand is either not on the handset or subsidiary to the handset makers.
In addition, close collaboration between manufacturers and operators has delivered high-profit services at reasonable costs in Japan - a market that many Europeans are now eying as a role model.
Will Microsoft win? One immediate problem is that its current generation of Pocket PC software that will power the first fleet of smartphones is reported to have niggling bugs.
But strategically, according to Per Lindberg, analyst with Dresdner Kleinwort Wasserstein in London , Microsoft has an obvious edge for top-end phones.
"For top-end mobile professionals Microsoft is a natural choice since it provides compatibility and inter-operatbility with PC applications," he says.
For lower end phones whose users just want to talk and send the occasional text message Microsoft 's position is weaker - but that's not so critical, he says, as the profits and growth should come from the higher end.
One rival, the operating system developed by Palm Computing Inc (X.PLM), is now "precarious", says Lindberg. The organizer functions that lay at the heart of Palm's success are now easily available on all rivals, he notes.
The other rival is the Symbian operating system, developed by a consortium that includes Nokia, Sony Ericsson and other manufacturers that include U.K.'s Psion PLC (U.PON).
This got a lease of life with the launch of Sony Ericsson's P800 communicator a few weeks ago - but users familiar with Windows on a desktop will find they have new skills to learn whereas those using a Microsoft -powered smartphone will find word processors, e-mail and other software very familiar.
In addition, Nokia is offering second-line manufacturers cheap access to some of its handset technology through a licensing program - giving them an incentive to stay away from Microsoft .
Despite making progress over recent weeks, analysts still don't see Microsoft 's software reaching the near-monoply it enjoys on PCs.
Most handsets are bought by operators for reselling to customers - and they don't want to find themselves reliant on a single supplier of software. In addition, with smartphones seen one of the few bright hopes among telecom equipment suppliers there appears, at the moment, room for more than just Microsoft .
"In reality, you're talking about a huge marketplace," said Phillip Redman, a U.S. -based analyst with Gartner Inc. (IT). It's unlike the PC marketplace, where you have the Windows/Intel monopoly. There's enough business here for two or three major vendors, as long as they have a good product."
Company Web sites: http://www. microsoft .com; telekom.de; http:// www.o2.com; symbian.com
-By Gren Manuel, Dow Jones Newswires; 44 20 7842 9279; gren.manuel@ dowjones.com
(Elena Berton in London and Buster Kantrow in Stockholm contributed to this article.) |
