Oct. 23 (Bloomberg) -- Microsoft Corp., facing new competition from Research In Motion Ltd.'s BlackBerry and Apple Inc.'s iPhone, is working with sellers of its Windows Mobile phones to cut prices below $100.

AT&T Inc. began offering the 3125 Windows Mobile model for $49.99. Another phone will go on sale for less than $100 next month, Microsoft said, declining to name the company selling the device.

Microsoft, the world's largest software maker, competes with Apple, Research In Motion and Symbian Ltd. in developing phones that handle e-mail and surf the Internet. More consumers are buying such devices, so-called smart phones, which had been the domain of corporate customers. As competition grows, Microsoft is cutting prices to appeal to a broader range of shoppers.

``Lowering the price at least gets Microsoft into contention,'' said Greg DeMichillie, an analyst at Kirkland, Washington-based research firm Directions on Microsoft. ``The really interesting idea in the market now is consumer, and that's where Microsoft has a problem.''

Microsoft designs the phones' operating system, while its partners build the hardware and sell the devices. The software is a smaller version of Microsoft's Windows system, which runs most personal computers. That may be keeping some consumers from embracing the format, DeMichillie said.

`Very Unwieldy'

``It's basically Windows crammed into a small device, and it's very unwieldy,'' DeMichillie said. ``If Microsoft is really serious about being in the consumer smart-phone area, they're going to have to rethink how they approach usability.''

Apple's iPhone, in contrast, doesn't even have a keyboard. The $399 device, which debuted in June, relies on a touch screen. The phone combines Apple's iPod media player with Internet functions.

Research In Motion also is selling new models targeted at consumers, such as the $200 BlackBerry Curve. For the first time last quarter, the company added more consumer and small-business users than corporate customers in North America. Research In Motion expects consumer growth to continue to outpace corporate sales.

By 2009, consumers will probably account for half of BlackBerry subscribers, up from 30 percent now, according to Maynard Um, an analyst at UBS AG in New York.

Microsoft shares rose 39 cents to $30.90 at 4 p.m. New York time in Nasdaq Stock Market trading. They have climbed 3.5 percent this year.

Price Drop

Microsoft is working with manufacturers to make its phones easier to use, said general manager Scott Horn. The products also will become more affordable, he said.

``In the next few weeks, you are going to see prices really drop on a lot of our phones,'' Horn said.

Microsoft Chief Executive Officer Steve Ballmer, who delivered a keynote speech today at the CTIA wireless industry conference in San Francisco, focused on ways to make it easier for large companies to provide phones to employees.

To pursue that goal, Microsoft will introduce System Center Mobile Device Manager 2008, a program that lets companies manage phones the same way they handle networks of PCs. The software will be available in the first half of next year, Horn said.

Microsoft last year racked up more than 350 of what it calls ``lighthouse wins,'' cases where the order encompassed more than 500 devices or beat out a competitor. That surpassed its goal of 120 such wins, named because the company feels they offer a ``shining light for others to follow,'' Horn said.

Still, not enough companies are making large phone purchases, he said.

Airwaves

To help it win customers, Microsoft formed a partnership with Enterprise Mobile Inc., a Boston-based mobile-phone consulting firm. Microsoft provided $10 million in financing to Enterprise Mobile CEO Morton Rosenthal, according to a filing in January.

Ballmer said the company isn't interested in bidding on U.S. mobile-phone airwaves. Rival Google Inc. said this year it might spend $4.6 billion to bid against companies including AT&T Inc. and Verizon Communications Inc. for the airwaves that will become available when broadcast television networks switch to digital signals in 2009.

``What would it buy us to own one piece of spectrum in one country?'' Ballmer said. ``It would probably do a lot to alienate the telecom industry.''

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: October 23, 2007 16:18 EDT