Microsoft Thinks Outside Business Box in the Battle for the Wireless Prosumer

By Tara Seals

Microsoft Corp.’s wireless division wants you. And everyone else as well. In a shift in strategy announced last week at Mobile World Congress in Barcelona, the software giant noted, a bit creepily, that it will be our constant “companion in a world of change.” In fact, it is now actively targeting the con-sumer — or, more specifically, the prosumer, which is that person who wants his or her communications to bring together work and home.

For VARs and dealers, the activity and focus on the work-life continuum represents a unique opportunity. Growth in U.S. revenue for mobile business applications will be close to 50 percent between 2006 and 2007, and 44 percent from 2007 to 2008, according to In-Stat.

Apple gained a healthy market share in just six months.

“As business users approach saturation for horizontal mobile data applications, most of the growth poten-tial remains for vertical market applications,” says Bill Hughes, In-Stat analyst. The penetration of at least one mobile data application among firms increased from 75 percent to 94 percent in 2007, he adds. Smart-phone use among U.S. business users increased 34 percent between 2006 and 2007. The highest applica-tion penetration just happens to be four horizontal applications that are all about matching up work and life: wireless e-mail, wireless Internet access, wireless instant messaging and personal information man-agement.

Microsoft is diving into this headfirst, with a push to align itself as a leader in smartphones and prosumer devices — with channel partners standing to receive more options to offer their clients. In a statement reit-erated sseveral times, Microsoft Corp.’s Robbie Bach, president of the entertainment and devices division, noted at Mobile World Congress that Microsoft is ahead of RIM Ltd.’s BlackBerry and Apple Inc.’s iPhone worldwide. The trouble with his numbers is this: of course Microsoft would be ahead of Apple worldwide, considering that the iPhone was a U.S.-only product for most of 2007. And retail sales reports from the NPD Group Ltd. saw the iPhone nabbing more than 27 percent of sales within North America at the end of 2007, placing it well ahead of Microsoft.

The reason? NPD says iPhone is managing to bridge the gap between content-focused feature phones and productivity-focused smartphones. “The iPhones Internet and media capabilities have resonated with con-sumers — especially those who previously owned Treos and Sidekicks,” says Ross Rubin, director of in-dustry analysis at NPD. “Its advanced operating system makes it competitive with smartphones for many tasks, while its sleek design and lack of expandability is reminiscent of fashion phones.”

BlackBerry owners, however, are less likely to switch to the iPhone, and that device remains in first place in North America. “The iPhones lack of corporate e-mail support appears to make it less appetizing to current Blackberry owners,” Rubin says.

The message for Microsoft is that there is an opportunity, with a little repositioning, to step up its game in North America, a market hankering for fixed-mobile convergence and wireless extensions. Unlike Apple, Microsoft is a specialist in corporate e-mail (of course), and already has carrier relationships with several major providers, including the triumvirate of AT&T Inc., Verizon Wireless and Sprint Nextel Corp. When it comes to BlackBerry, with its outages (the latest coming during Mobile World Congress, ironically), Windows Mobile may have an advantage, particularly considering its integration into the Microsoft OCS unified communications world and ability to support e-mail on an existing, secure NT server. All that is lacking is a status as a company making devices that are personal, business, and anywhere in between, so it can tackle markets BlackBerry can’t.

To Rubin’s point about Sidekick users being more likely to switch devices, Microsoft announced at Mo-bile World Congress that it plans to acquire software company Danger, the folks behind — you guessed it — the T-Mobile USA Sidekick device. The Danger acquisition also will give Microsoft a competency in social networking and multimedia.

When it comes to creating a hip offering, it also announced a new Windows Mobile 6.0 device, Xperia X1 from Sony-Ericsson. “We are interested in the person who wants to remain constantly connected to data, pictures and media for a personal experience,” Bach said. The Xperia, which marks the first Windows Mobile device from the vendor, leaving Nokia as the only major not supporting the OS, has a touch screen (sound familiar?), a slide-out keyboard and it is optimized for music and pictures. “This completes the pic-ture of us making the transition from just being in the business side of things,” said Bach.

With devices potentially there in support of Microsoft’s goal, there’s still the issue of perception when it comes to taking on Apple and beating BlackBerry. Up to now Microsoft has focused primarily on domi-nating the world of IT staffers everywhere, and its Windows Mobile devices, with their Outlook synch and secure remote-office capabilities, have been seen as aimed squarely at the business person. Not so now, Bach explained.

In the future, “cellular is not going to be about voice,” he said. “Its going to be about having a multipur-pose platform to support a wide variety of uses. So we are going to span users lives, from work to home.” Clearly, for dealers that’s an opportunity; for VARs, more demand for professional services.

Microsoft’s new embrace of the consumer side of things may also help it fend off other threats. Google Inc., with its Open Handset Alliance and Android platform, is poised to give Windows Mobile 6.0 yet an-other competitor and likely a strong one, considering the coolness factor and the number of manufac-turers on board with Android.

Microsofts move to try and pick up the financially struggling Yahoo! Inc. was a strategic one as Micro-soft tries to head off another loss to a new market entrant. In addition to being the company most likely to have triggered the open access mandates in the 700MHz auction with a bid (at press time the auction had not yet ended), Google may be using the Android strategy to bolster the market for its mobile search and other wireless apps. And it certainly would like to see proprietary roadblocks to market domination go away, like Microsofts Windows Live service.

Yahoo!, the No. 1 destination for wireless Web surfers, according to the ratings from Nielsen Mobile, clearly would have positioned Microsoft to take on Google in the mobile space. And, it maybe might even gain a little ground against Apple while its at it. The iPhone has AT&T for distribution. Yahoo! has con-tracts with AT&T and T-Mobile and a known knack for the user interface. For instance, at Mobile World Congress Yahoo! unveiled oneConnect, an open architecture for developers that aggregates basic mobile communications tools – e-mail, IM, text messaging and social networking. It will use widgets to provide users the capability to access e-mail from Yahoo! Mail, MSN Hotmail, Gmail and AOL; its also in dis-cussions with DataViz to work together on widget versions of the DataViz services, RoadSynch and Documents To Go. It also will have integrated SMS.

At press time, the outcome of Microsoft’s hostile overture to Yahoo! was as yet unknown.

Apple Inc. www.apple.com

Google Inc. www.google.com

Microsoft Corp. www.microsoft.com

Mobile World Congress www.mobileworldcongress.com

NPD Group Ltd. www.npd.com

RIM Ltd. www.blackberry.com

Sony-Ericsson www.sonyericsson.com

Yahoo! www.yahoo.com