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Microsoft's Mobile Initiative

By Olga Kharif Microsoft is trying to gain a stronger hand in the mobile-devices market by doing what it does best: Winning the hearts and minds of software developers.At Microsoft's (MSFT) annual conference for mobile-software developers, held in Las Vegas on May 10, Chairman William Gates unveiled a new mobile operating system -- Windows Mobile 5.0 -- which will largely unify the company's previously separate software for cell phones and personal digital assistants. Now that the platform for both devices is practically one and the same, it will be easier for developers to work with Microsoft's software.

Moreover, the operating system's many nifty features -- such as its support for miniature typewriter keyboards and the ability it offers users to view e-mail attachments and PowerPoint presentations -- make it comparable to RIM's (RIMM) famed BlackBerry, which is mostly used for wireless e-mail access. "[The new operating system] does help Microsoft to close the gap," says Todd Kort, an analyst with the research company Gartner.

TRIED AND TRUE. While all of this may sound like a marked change, it's really a page out of the old Microsoft playbook. Since its early days, the company has excelled at convincing software developers to write programs that build on top of Microsoft's products. In the process, Microsoft creates what software gurus call an "ecosystem" in which other types of software become inseparable from its own creations.

That's just what the folks in Redmond (Wash.) are trying to achieve now in the mobile market, and the uptake for the new operating system is expected to be healthy. Several manufacturers, including Samsung, have already unveiled devices using Windows Mobile 5.0 in Europe, and the operating system is expected to become available in the U.S. from manufacturers such as Dell (DELL), Hewlett-Packard (HPQ), and Motorola (MOT) in the summer or in early fall, says Susan DelBene, a corporate vice-president of marketing for the mobile & embedded devices division at Microsoft.

Though rivals say Windows Mobile 5.0 doesn't do anything they don't already do, it could be bad news for the world's largest cell-phone maker, Nokia (NOK), which uses a rival smart phone operating system called Symbian. And that's not to mention the difficulties it could cause for mobile-device makers such as RIM and palmSource (PSRC).

WINDOW ON THE FUTURE. Microsoft is certainly putting plenty of marketing clout behind its mobile push, with a blitz rumored to reach $100 million in spending before it's over -- a startling sum when you consider Microsoft Mobile, together with Microsoft's other offerings in consumer-electronics software, generated only $80 million in sales in the first quarter. Microsoft execs won't say for sure how much they plan to spend but, "You'll see a bigger marketing effort from us than you've ever seen in the past for Windows Mobile," says DelBene.

At stake is one of the fastest-growing segments of the tech industry. Sales of so-called smart phones, which Microsoft is targeting, are expected to increase 67% this year, to 32.2 million units, according to researcher In-Stat. While the PC market is stuck in single-digit growth, sales of software for mobile devices could be nothing less than one of the keys to the software giant's future. Kharif is a reporter for BusinessWeek Online, based in Portland, Ore.

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