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Originally published October 9, 2010 at 8:31 PM | Page modified October 9, 2010 at 9:41 PM

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Microsoft has a lot riding on debut of Windows Phone 7

While the Apple iPhone disrupted the mobile landscape with a touch screen and apps, Microsoft made middling changes to its Windows Mobile platform.

Seattle Times technology reporter

Microsoft and the mobile landscape, through the years

1996: Microsoft develops Windows CE, an operating system for handheld devices, to compete with personal digital assistants from Palm.

1997: Windows CE 2.0 comes out, adding support for color screens and the ability to sync e-mail with a computer.

1998: Nokia creates Symbian, a company that develops software for Nokia cellphones. Microsoft introduces the PalmPC.

1999: Research In Motion introduces the BlackBerry for sending and receiving e-mail.

2000: Windows CE 3.0 comes out, giving device makers more room to customize the software. Microsoft introduces the PocketPC.

2003: Windows Mobile 2003, the successor to PocketPC, is introduced. It combines a phone with a handheld device that work with a stylus.

2005: Windows Mobile 5.0 comes out. It adds a push-to-talk feature and the ability to use a finger-touch keypad instead of a stylus. Palm and Microsoft partner to make the Treo smartphone.

2007: Windows Mobile 6.0 launches with Microsoft's Windows Live software, more e-mail integration and Office Mobile. Apple starts selling iPhone. Google announces Android, a free mobile operating system.

2008: Microsoft buys Danger, the company that makes the Sidekick smartphone.

2009: Microsoft launches Windows Mobile 6.5 and re-brands it as Windows Phone. The company opens an app store for Windows Phones.

2010: Windows Phone 7 enters the market.


Falling behind doesn't quite capture the magnitude of Microsoft's missteps with mobile phones.

The company has been slapped. Spanked. Schooled.

While the Apple iPhone disrupted the mobile landscape with a touch screen and apps, Microsoft made middling changes to its Windows Mobile platform.

While Google amassed an army of Android phones, Microsoft launched the Kin phone, then killed it several weeks later.

The company has been shaken and, its shareholders hope, finally stirred.

After three years on the back bench, Microsoft says it's ready for its second act. On Monday in New York, the company will debut Windows Phone 7, a mobile operating system Microsoft hopes will become every tech fetishist's object of envy.

What's at stake is the company's future. Microsoft must prove it can build a Windows-sized stake in computing on devices like the phone and tablets, or its future may be permanently yoked to the large but lumbering future of PCs.

"In the short run, people gotta want these phones," Microsoft Chief Executive Steve Ballmer said in an interview two weeks ago. "I think they're going to look pretty good. That's the most important thing. If we start the popularity chain, and start kind of the buzz around these things, we'll be able to make some money off of them."

Five years ago, the company's PC-think appeared to slow its momentum in the mobile world. It seemed unable to turn on a dime when the iPhone came out, it may have underestimated the consumer market and it made a few bets that just went wrong.

"They always have trouble getting around their Microsoft-ness," said Rob Enderle, a consultant with the Enderle Group in San Jose, Calif. "Whether we were talking about PocketPC or the initial Microsoft mobile platform, the platform seemed to carry a lot of baggage going back to Windows."

Observers say Windows Phone 7 could be the first step in a long road back into a crucial market.

IDC, a research firm in Framingham, Mass., estimates 270 million smartphones will ship worldwide this year.

Microsoft is trailing in fifth place in the operating-system market for these phones, with 7 percent. Nokia's phone software, Symbian, has 40 percent.

Research In Motion, with its BlackBerry, is in second place at 18 percent, and Google Android has grown to 16 percent. Apple iPhone has 15 percent, according to IDC.

Apple sold 8.4 million iPhones in the last quarter, while Google says 200,000 Android phones are activated per day.

Even with that many phones in the market, there are still opportunities to exploit. Many iPhone users are unhappy with network coverage and dropped calls on AT&T Wireless, the exclusive carrier for Apple.

Android's openness to developers also could be its Achilles' heel. The diversity of devices and the low barriers to getting approved for the Android marketplace mean quality can be uneven.

Visually "stunning"

Microsoft making a cool phone may sound like Dr. Evil doing the Macarena to look hip, but observers say the company has come up with a redesign of its mobile software that looks fresh.

It's not the technology breakthrough the first iPhone may have been, but it looks new.

"Visually, it's stunning," said Jonathan Sasse, vice president of marketing at Slacker Radio, which will launch a Windows Phone 7 app on T-Mobile USA.

The applications and fonts bleed off the screen borders, encouraging developers to build panoramic apps that extend left and right with finger swipes.

The "live tiles" that make up the home screen animate and update, pulling photos and status updates from Facebook, for instance. The phone also is integrated with Xbox Live, Microsoft's online video-game network, which has more than 25 million subscribers.

"What I like about it is there's still some 'amaze and delight' features," said Will Stofega, an analyst at IDC.

Microsoft has not confirmed anything publicly, but Windows Phone 7 is expected to be available through AT&T Wireless and T-Mobile in the U.S. this year.

"The biggest problem they're going to have to overcome is the name. Windows Phone 7 does not fall trippingly off the tongue," Enderle said. "Their most successful consumer product was Xbox; they did not call it Windows XP Gaming Edition."

There has been speculation Microsoft may spend half a billion dollars to promote the phones; the company declined to comment on the number, but the budget will surpass anything it has spent in the past on mobile marketing.

A missed opportunity

The heavy spending is part of Microsoft's attempt to hit the reset button on a long, sometimes troubled history in mobile.

Back in 1996, Microsoft created the Windows CE operating system for handheld devices to compete with a personal digital assistant from Palm. In 2000, the company came out with the PocketPC.

Three years later, Microsoft turned PocketPC into Windows Mobile 2003, combining the PDA with a phone. The device's touch screen could be controlled with a stylus.

The company's biggest competitors then were Nokia's Symbian and the BlackBerry.

Two years later, Microsoft came out with Windows Mobile 5.0, which allowed callers to use a touch keypad. In this round, the company partnered with Palm, a longtime rival, to make a Treo smartphone.

The watershed year was 2007. Microsoft made some incremental updates and called it Windows Mobile 6.0. A few months later, Apple unveiled the iPhone.

In the fall, Google announced Android, a free mobile operating system. Developers flocked to both platforms to build programs for their respective app stores. Microsoft, which has historically had the strongest developer support among the tech powerhouses, had no app store until 2009.

"It was a story of a missed opportunity," said Matt Rosoff, a former analyst at independent research firm Directions on Microsoft in Kirkland who's now with the Silicon Alley Insider news site.

To build up its mobile-phone business, Microsoft bought Danger, maker of the popular Sidekick smartphone, in 2008. That acquisition led to the launch of the Kin phone, which came out earlier this year and was killed several weeks later after poor sales.

"You've got to be bold, you've got to look forward and you've got to stay focused," Ballmer said. "Kin was neither — with 20-20 hindsight — bold enough relative to where the market's going, and it just defocused activity from Windows Phone."

The race to create apps

Even if Microsoft appears hopelessly late to the party, the company has shown a dogged persistence to revive other straggling businesses.

In search, for instance, Microsoft was just a sliver of the market with Live Search two years ago.

The company redesigned and relaunched its search engine as Bing, sealed a partnership with Yahoo, and now is in a distant, but respectable, second place behind Google.

The key to a similar move with Windows Phone 7 is recruiting developers to build apps, which drive phone sales.

PopCap, a Seattle game company that makes top-selling iPhone games "Plants vs. Zombies" and "Bejeweled," has hired more engineers to build games for Windows Phone 7.

"This is obviously a bet by PopCap that Microsoft will finally kind of crack the smartphone market," said Andrew Stein, director of mobile-business development at PopCap.

He will be watching Microsoft's progress closely and re-evaluating phone sales next June. By then, Stein said, "They need to be on track to do at least 10 to 30 million [phones] a year."

Wall Street is impatient as well. Last week, Goldman Sachs downgraded Microsoft stock to neutral, saying the company needed to show some progress on mobile devices such as the smartphone and a device to compete with the iPad.

As Goldman Sachs analyst Sarah Friar wrote in her report, "The company needs an immediately successful Windows Phone 7 launch."

Sharon Pian Chan: 206-464-2958 or

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