A Wolf in Wolf?s Clothing
By C.J. Kennedy, Mon Apr 23 00:00:00 GMT 2001

Microsoft?s wireless strategy is expanding with carrier partnerships. Telstra, T-Mobile, and Vodafone have already signed on. Who?s next, Verizon?

At CTIA, the biggest North American wireless conference of the year, devices, developmental tools, and new partnerships clamored for notice. But perhaps the most industry-changing news was quietly whispered by a former high-level Microsoft employee, currently CEO of his own wireless company, to a single member of the press.

Microsoft was in partnership talks with Verizon, America’s largest wireless carrier. An announcement was imminent.

On April 10th of this month, TheFeature.com interviewed Ed Suwanjindar, Product Manager for the Mobile Device Division at Microsoft, about the Verizon rumor. He did not deny it, and said, “Microsoft is in talks with various carriers, but will not be making any announcements for these next two weeks.” Well, after April 24th - watch out.

All the right connections

This Microsoft/Verizon partnership will follow Microsoft’s partnership announcements with carriers like Telstra of Australia, T-Mobile of Germany, and Vodafone of the U.K, at 3GSM world on February 19th 2001.

On November 6th, 2000, Microsoft announced their first carrier partnership with Voicestream of the U.S. Now, not only are mobile phone, PDA, and smartphone manufacturers like Nokia and Ericsson taking notice of Microsoft, but major middleware and IT players, notably Oracle and IBM, are bracing for a fight.

The wireless industry can assume the impending deal with Verizon will not be simply an outlet to sell mobile phones. Carrier announcements are important for two reasons: First, carriers sell phones. Consumers usually buy a smartphone through a carrier deal. Second, and more importantly, carriers also open huge channels for Microsoft to market their software, middleware, and developmental tools.

Telstra, T-Mobile, and Vodafone have pledged to use Microsoft’s data services, and Voicestream will be incorporating Microsoft’s Mobile Explorer technology in a joint venture with Samsung.

What makes Oracle and IBM pay special attention is Microsoft’s connectivity. Microsoft offers integration with its desktop applications. PCs run Windows, PDAs run Windows, phones run Windows. In the first two months of sales for Windows 2000, 500,000 retail units were sold, not counting corporate upgrades. That is a lot of PCs that will eventually be connected to a mobile device.

As the U.S. economy slows, individual spending will decrease, and growth in the mobile market will be coming from corporations. Most corporate systems run Microsoft’s Windows. “Microsoft has the right relationships with not only corporations using their operating systems on their PCs, but also with companies like HP and Compaq, who are selling the PCs,” says Kevin Burden, Analyst and Program Manager for Smart/Handheld devices at IDC. “Compaq will say, ‘we’ll sell you 10,000 desktops and throw in 500 Pocket PC’s into the deal.’ That’s how Pocket PCs will be adopted on an enterprise level.”

For a middleware example, if a company like TicketMaster is looking for a wireless ticketing solution, Verizon and Microsoft can offer added value by designing a solution that is seamlessly connected to TicketMaster’s Windows-run PCs.

No mobile company is an island (but Microsoft tries)

Currently, Microsoft is fighting legal battles against the American government over bundling their Internet browser with their PC operating system. The mobile industry watches as Microsoft rolls out announcements with carriers and wonders about the implications on their own market.

Until recently Microsoft was seen as respectfully easing into the wireless market. Back in1998, Microsoft's early Windows CE was simply a shrunken version of the Windows PC operating system - too difficult, too slow, and too complex for a PDA with limited memory. "Our initial attempts at these devices weren't perfect," admits Phil Holden, the Marketing Director for the Mobile Device Division at Microsoft. "In the early days, we might have been trying too hard to take the Windows experience and squeeze it onto a mobile device. We took that feedback and went back to the drawing board with the Pocket PC." The result is a better product.

"They have not been so heavy handed. They have been humble," explains Neil Ward-Dutton, Research Director at OVUM. As examples, Mr. Ward-Dutton sites Microsoft's ability to listen to smaller mobile companies and hire European staff, including Juha Christensen, Microsoft's new VP of the Mobile Device Division, who wrote Symbian's first business plan. Ward-Dutton continues, "Microsoft has recognized that although they are strong in their industry, they are now involved in a new market."

However, Microsoft's humility has not included cooperation. Unlike Nokia, Ericsson, or Motorola, Microsoft has stood apart from most of the open standard initiatives formed by the big three, notably SyncML. On April 11th of this year Microsoft announced that Windows XP, their next version of the Windows operating system, would not include Bluetooth compatibility, another open-standard initiative. Although Socket Communications has announced a Bluetooth solution for the Pocket PC, the Bluetooth snub means that Microsoft is not willing to share their strongest card, connectivity to their PC operating system.

Furthermore, Microsoft still has not incorporated JAVA into their Windows operating system. This excludes the 2.5 million JAVA developers from producing Pocket PC solutions. (But then again there are 6 million Windows developers out there who can produce solutions.)

All the customers, all the profits

Does it appear that Microsoft’s wireless strategy is similar to John Rockefeller’s for Standard Oil? Rockefeller bought the oil fields, the oil pumps, the refineries, the barrels, the transportation and pipelines. No middlemen meant he could cut competitors out of the market.

Exclusivity is the hallmark of Microsoft. Most analysts have never seen Microsoft as anything but aggressive, regardless of their market share. “Clearly there is an anti-Microsoft sentiment in the mobile industry,” says Ken Delaney, VP of Mobile Computing for Gartner. “They have to be a little less aggressive in building a market. They should be more humble and they should support Bluetooth and SyncML. They have to realize that they can’t take every last dollar.”

Call Microsoft anything you want - except a monopoly

In at Cannes, France, the week of February 19th 2001, Microsoft’s team stood on the deck of their yacht, the Ava, and looked across the Marina at the bigger, more impressive vessels of Ericsson, Motorola, and Nokia. Microsoft’s yacht was one of the smaller boats.

But neither the importance of Microsoft’s new device, the “Stinger” smartphone, nor Microsoft’s carrier announcements was lost on the companies hosting bigger boats across the bay. “We did a lot of demos at Cannes,” says Ed Suwanjindar, Product Manager for the Mobile Device Division at Microsoft. “And at every demo there was a representative from Nokia standing at the back of Congress Hall, watching.”

Mr. Suwanjindar laughs, “It was our coming out party. Our announcement of the Stinger was a real shot across the handheld manufacturers’ bows.” Suwanjidar’s tone doesn’t sound like that of a representative of a monolithic supercompany, but of a hopeful underdog. “Of course,” he adds. “We didn’t have anywhere near the largest yacht. Not even in the top quarter of yachts.”

But the bigger boats across the water may soon realize that Microsoft is far from harmless in the wireless realm. In fact “pirates in the marina” may be an apt description.

After spending the ninties working in a copper mine in Australia, managing a coffee shop, starting a literary journal, and teaching in the South Bronx, C.J. Kennedy started covering the wireless industry. C.J. is currently the senior staff writer for Unstrung.com, and has covered the industry for M-Business Magazine, The Wireless Developer Network, Wireless Business & Technology, Wireless Related, and The Industry Standard.