Smartphone Market Heats Up: But Is It Too Late for Microsoft?

Microsoft unveiled a number of Smartphone initiatives this week in a bid to retain interest in its flagging cell phone wares, but the market might have already decided to exclude the software giant, as its entrenched competitors move ahead with products and services that already outstrip what Microsoft hopes to offer. The problem for Microsoft is obvious: The company has rarely done well in new markets where it was unable to leverage its PC monopoly--witness its high-profile failures in interactive TV and video games for obvious examples--and the cell phone market is already well established, with various hardware and software makers, and services carriers. Microsoft's entry into this market has been rough at best, and some of its one-time partners, such as Sendo, have bailed from the Smartphone platform, while play both sides of the fence, striking partnerships with Microsoft competitors. Are this week's announcements enough to turn the tide?

Here's what Microsoft revealed this week. First, the company will deliver Pocket MSN, a suite of feature-rich mobile data service optimized for Pocket PCs and Smartphones. Pocket MSN will provide always-on access to MSN e-mail, instant messaging (IM) and other online services, with various service carriers, including T-Mobile, which signed up to deliver the service in Europe. Microsoft also announced a partnership with Intel to deliver a Smartphone concept design for hardware makers to implement. Based on the Intel Personal Internet Client Architecture (Intel PCA), the concept design gives phone manufacturers a good starting point for next generation phones, with a 176x220 color screen, XScale processor, integrated camera, and up to five hours of talk time. Finally, Microsoft and Samsung also unveiled the new Windows Powered Samsung MITs SGH-i700 Pocket PC for GSM/GPRS networks, a Pocket PC device that features cell phone capabilities.

The problem, of course, is that other cell phone makers already offer similar features in their non-Windows phones, and those devices are available today through a variety of service providers. As is the case with the interactive TV market, Microsoft is finding itself shut out of an existing market that is rapidly adopting computer-like technology. And Microsoft's software competitors are seizing the moment. Multimedia provider RealNetworks announced a deal this week to provide Swedish wireless phone maker Telefon AB L.M. Ericsson with its technology, and cellphone maker Nokia recently said that it would work with Oracle on mobile email solutions. IBM is working with a variety of companies in this market, and even Microsoft partner Samsung has plied the competitive waters, with a 5 percent investment in phone software maker Symbian. When asked about its work with Microsoft competitors, Samsung's head of mobile handsets, San-Jing Park, told Reuters that Microsoft "took all the value and left hardware makers as \[Smartphone\] clone producers." And Siemens is another Microsoft partner that works with non-Microsoft technologies for some of its products.

In the highly competitive market for next-generation cell phones, backing Microsoft might not be such a solid bet. In fact, it might just be a sure-fire failure. After years of work creating software and hardware reference designs, Microsoft has precious little success to show, beyond some adoption in Europe. I don't think this week's announcements are going to help much.

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