Microsoft goes Mobile

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From the companies' point of view, this is a win-win deal. To Vodafone, the dongle represents an entrée into the fixed-line world, since most PC or laptop users connect through a traditional telecom operator like BT or Deutsche Telekom.

For Microsoft, the dongle is part of a broader push to control how software developers construct their games,

	Microsoft In Europe Hitting a Wall In Europe, Microsoft has had a tough time expanding beyond its core software business. The company has ventured into cable TV, mobile and Internet services, but without notable success. Here's a look back: JANUARY 1999: Microsoft begins a three-year, $3.5 billion investment in European cable firms, including British operators Telewest and NTL and the Netherlands' UPC. The company hopes they will deploy Microsoft TV software. In 2001 Microsoft chief executive Steve Ballmer hails Microsoft-based interactive TV as "a revolution in broadcasting." MAY 2002: Microsoft pulls its three directors off the Telewest board and starts to sell off its investment. By May 2003 it has sold out at Telewest. OCTOBER 2000: U.K. mobile-phone maker Sendo, a start-up company with no revenue, agrees to produce a phone that runs on a slimmed-down version of Microsoft's Windows operating system. OCTOBER 2002: The alliance crashes, as Sendo halts production of the phone just days before it's scheduled to ship units to Spain's Telef[a {o}]nica M[a {o}]viles. Sendo defects to Nokia. DECEMBER 2002: Sendo sues Microsoft in a U.S. federal court, alleging a "secret plan to pillage Sendo of its technology ... and leave Sendo cash-starved and on the brink of receivership." Microsoft denies the charge and countersues; the case is still pending. NOVEMBER 2002: Microsoft's MSN service launches a partnership with BT to sell Microsoft's MSN8 portal software with BT access, which Ballmer says is "a great catalyst for broadband penetration." SEPTEMBER 2003: BT shunts the MSN8 project to the side, as it launches its new BT Yahoo brand, with content from Microsoft rival Yahoo

maps or anything deliverable to a mobile phone that users might want to pay for in small chunks of dosh. The idea is that if all developers abide by a common industry standard — say a Microsoft standard — then any downloadable product (such as a ring tone) would work over any network on any brand of handset.

Ultimately, these issues are less about technology than they are about billing. Microsoft's Knook envisions a world in which developers of mobile-phone games, music and services abide by Microsoft's blueprint, and tie their offerings into a telecom company's billing system, allowing operators like Vodafone to deliver a neat monthly bill. The project is a radical departure for Microsoft, in that it gets none of the revenues. "We should not be in the middle,'' says Knook. "This is a different approach.''

So what's in it for Microsoft? For starters, it helps the company push its ongoing ".Net" initiative, a major focus of Microsoft's $6.8 billion R and D this year. Dot Net is Microsoft's approach to an industrywide interest in "Web services," in which any application works on any computer through the Internet. With last week's Vodafone announcement, Microsoft hopes to expand ".Net" to the mobile world. Microsoft also hopes to sell a lot more software for back-end "server" operations that will handle billing and processing for mobile services. More immediately, the Vodafone alliance represents one more step in Microsoft's long, slow march against dominant European players like Nokia.

But most mobile operators have resisted Microsoft's overtures. Other than Orange, no major European operator has marketed a Microsoft-based phone, although some, including T-Mobile, O2 and Telefónica Móviles, are selling a Microsoft-based "personal digital assistant" which has phone capabilities.

MSN is another prong of Microsoft's push. Ideally, customers would go back and forth seamlessly between MSN on the computer and MSN on the phone, primarily for e-mail and Web surfing. But MSN has progressed slowly in Europe. Several operators have licensed MSN services over the past two years, but so far have stopped short of loading an MSN "portal" onto their phones. Despite promises from T-Mobile and others to offer such a portal as early as later this year, Jessica Figueras, an analyst with the London — based research firm Ovum, says mobile operators launching an MSN portal "would be like turkeys voting for Christmas,'' because it would siphon users away from the operators' own portals.

The Vodafone initiative could yet backfire if the industry objects to Microsoft and Vodafone attempting to impose their will. Gates made it clear that that's what the two companies are up to, noting that "Microsoft and Vodafone want to drive these standards forward and make that a platform for the industry."

Others wonder how such a tentative deal as the dongle is going to gain traction and enter widespread use. An appropriately vague Microsoft statement calls Gates' speech an "outline of a vision." Vodafone chief executive Arun Sarin didn't even show up for the announcement, sending a lieutenant instead — not the diplomatic courtesies to which Gates is accustomed. Knook said he did not know who will make or sell the dongles. Neither did Vodafone "strategic relationship executive" Paul Davey, who said dongle-related services won't surface until the second half of next year at the earliest.

The alliance will at least advance Microsoft's mind share in the European mobile industry. But that's the easy part. Gates will have to wait to find out whether his trip to Geneva actually advances sales, or is left dongling in the wind.