Microsoft unveils Windows-based phones

NEW YORK — Microsoft Corp.
lifted the wraps Monday from a line of handsets for its new Windows
Phone 7 mobile-operating system, which the software giant hopes will
revive its sagging business in the smart-phone market.

At a media event in Manhattan, Microsoft Chief Executive Officer Steve Ballmer touted the company’s efforts to build “a different kind of phone.”

Features for the phones that Microsoft hopes will help the devices stand out in a competitive sector are Microsoft Office software, Xbox Live accounts and close integration with online services such as Facebook and Slacker.

Several device manufacturers from the PC and wireless industries, including Dell Inc., Samsung, HTC and LG, will build handsets for the platform.

The first phone, the Samsung Focus, will launch Nov 8. with AT&T Inc. Speaking at the event, Ralph de la Vega, chief executive of AT&T mobility and consumer markets, said the carrier plans to offer phones from LG and HTC within weeks of the launch.

The devices “offer a user experience unlike anything we (at AT&T) have ever seen,” added de la Vega.

All three handsets will cost $200 each, and will be powered by the Snapdragon processor built by Qualcomm Inc.

Ballmer said that Windows Phone 7 devices will be carried by 60 operators, including T-Mobile, Orange and Vodafone PLC, in 30 countries. Nine handsets have been developed so far to run Windows Phone 7, he pointed out.

As part of what Microsoft and AT&T
are billing as a new experience, Windows phones will be organized into
six hubs — people, pictures, office, music and video, games and apps —
and each hub will be connected to cloud services.

For example, the pictures hub will not only display
pictures taken by the phone, but also photographs downloaded from a
synced PC and any albums from a user’s social-networking account, such
as Facebook. Users can also upload photos taken by the phone to their
Facebook account by simply tapping on the picture. In the people hub,
contact information, including photographs and updates, can be directly
downloaded from Facebook and similar services.

“(We’re) trying to connect to cloud services in a very interesting way,” said Joe Belfiore, corporate vice president at Microsoft, who led the design of Windows Phone 7.

Belfiore added that Windows Phone handsets will be the only devices to offer access to Microsoft’s Xbox Live games and digital network. Belfiore also announced at the event that videogame-making giant Electronic Arts Inc.
will have a “suite of games” available on the devices, and proceeded to
show game play on a phone from one of EA’s best-selling titles, “The
Sims 3.”

Windows Phone’s social and gaming aspects seem to take aim at Apple Inc.’s iPhone and handsets built for the Android operating system developed by Google Inc. But Belfiore also showed off what the devices can do with Microsoft Office software, presenting features for the corporate market currently dominated by the BlackBerry line of products from Research In Motion Ltd.

“The Office capabilities built in (to the phones) are unique and incredibly powerful,” he said.

Outlook, Microsoft’s
e-mail software, will be fully integrated with a user’s PC account, and
the devices will also provide access to shared documents stored on
cloud servers. The phones will run presentations on PowerPoint 2010,
and users will also be able to edit and change slides using the
software as well.

All the phones will feature three “hard” buttons at
the bottom: a back button, an action button akin to the iPhone’s one
“hard” button, and a search button, which will launch Microsoft’s Bing search engine.

Among other features, users will have free online
access to their phone, with a website that shows their device’s data
and files.

Microsoft faces
an uphill battle as it tries to regain share in the mobile device
market after its predecessor OS — Windows Mobile — diminished
significantly in popularity after bruising competition from rivals.

As a result, the software giant has become a minor
player in the market, with Windows accounting for less than 5 percent
of the global smart-phone market by the end of August compared with 8.7
percent for the same period last year, according to data from Gartner Inc.

In that time, Android’s market share has soared from
3.9 percent to 17.7 percent, while Apple’s iOS has climbed from 14.4
percent to 15.4 percent.

“Do I think that this is a marked improvement over
previous versions of the OS? Absolutely. Do I think that it will have a
positive impact on sales this year and next year? Yes, I do,” Gartner analyst Carolina Milanesi wrote in a blog post on Monday. “Do I believe that Microsoft has done enough to establish itself as a key OS in five years’ time? I am not sure.”

Analysts covering Microsoft
generally believe that the company’s mobile software generates a
marginal amount of revenue, though it’s nonetheless a strategically
important business.

Microsoft does
not publicly disclose the amount of revenue it sees from its mobile
business. But analysts estimate that mobile software currently accounts
for anywhere between $200 million and $1 billion of Microsoft’s annual sales — a small fraction of the firm’s $62.5 billion in sales for the fiscal year ended in June.

“It probably has not been a huge growth business for a few years,” said IDC analyst Al Hilwa. Microsoft’s
“Windows Embedded” software, used to power devices such as
vehicle-navigation systems and printers, is actually likely to have
provided a bigger financial boost for the company than mobile-phone
software recently, he indicated.

But Windows Phone 7 now presents a significant growth opportunity for Microsoft, analysts say. It’s also an important means of helping to support the adoption of other Microsoft products by both consumers and businesses on mobile devices.

Directions on Microsoft analyst Matt Rosoff, who estimates that Microsoft’s mobile business now garners no more than $500 million per year in revenue, said a mobile offering is “important for Microsoft to help bolster its enterprise software.”

Rosoff estimated that Microsoft collects between $15 and $20 per mobile phone with every sale of a Windows Phone 7 license. Microsoft does not disclose the amount it receives per copy of Windows.

In Microsoft’s
annual proxy filing earlier this month, the company disclosed that
Ballmer’s annual bonus was crimped by factors including the company’s
loss of market share in the mobile-phone market.

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