Microsoft smart guy takes on smart-phone business

With Windows devices lagging behind the Palms and BlackBerrys, Microsoft enlists an electrical engineer from China.

REDMOND, Wash.--With Windows-powered mobile devices lagging behind the Palms and BlackBerrys of the world, Microsoft has brought an electrical engineer from China--a master of the strategy game Go--to put them back in the race.

He is Ya-Qin Zhang (pronounced yah-CHEEN jong), 39, an experienced computer systems researcher who helped start Microsoft's Beijing research laboratory in 1999. He was tapped in January 2004 to come to Redmond, where Microsoft is based, to lead the turnaround of the Windows Mobile software business, which has hemorrhaged money for years.

Microsoft's chief executive, Steve Ballmer, first discussed the job with Zhang while he was on a trip to China in 2003 and the two men were in the anteroom of the state guesthouse, waiting for a meeting with the Chinese prime minister, Wen Jiabao. "This is really important to the company," Ballmer said, as Zhang recalls it. Now the first results of Zhang's efforts are scheduled to be unveiled at a conference May 9-10 in Las Vegas at which Microsoft plans to introduce the next version of its Windows Mobile software, code-named Magneto, with new productivity and multimedia features.

Industry speculation is that Microsoft has been fashioning the software as a " RIM-killer," a reference to Research In Motion, the Canadian company that dominates the corporate handheld computing market with its BlackBerry.


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That claim elicits a polite demurral from Zhang, a onetime math prodigy who entered college in China at 12 and graduated first in his class before coming to the United States to get his doctorate.

Magneto will test what Zhang said was his attempt to create a new focus on quality software--a break from the Microsoft practice of emphasizing a cascade of new features in each successive product release.

"Now the first thing is quality," he said, adding that his second priority is building partnerships for the Windows Mobile business, which has so far failed to replicate Microsoft's impact in the desktop computer world.

To his task he brings the mind of an inveterate player of Go, the ancient Chinese board game, in which he can hold his own against professionals. Far more complex than chess, it is a game that requires patience, the weighing of trade-offs, and the ability to make moves that are startlingly indirect.

He will need all the skills at his disposal if Microsoft is to prevail in the mobile software arena. Although revenue from its mobile and embedded software--that is, software for devices other than PCs--increased last year by 58 percent, to $247 million, over 2003, Microsoft nonetheless lost $224 million in the category last year. That was the third consecutive year of losses.

Microsoft has made inroads into the software market for handheld devices and more limited progress in finding customers to use its software in so-called smart phones. They include Motorola and Samsung, along with some lower-profile handset makers that allow cellular carriers to brand their own phones. But Microsoft faces challenges in trying to replicate the PC business model in the world of mobile devices.

It must contend with cellular telephone operators who control sales channels as well as technical specifications for products. And it is coming late to the software market for smart phones--cell phones with PC functions like e-mail, multimedia, Web browsing, instant messaging and games. On that front, it faces powerful competitors like Symbian, owned by a consortium of cellular handset makers, and PalmOne and PalmSource, the scrappy Silicon Valley companies behind the hit cell phone organizer called the Treo.

Symbian, whose partners include Nokia and Sony Ericsson, had 80.7 percent of the smart phone software market in the third quarter of last year, compared with 8.4 percent for PalmSource and 7.3 percent for Microsoft, according to the market research firm Gartner Dataquest. (Most of Symbian's market share comes from the Nokia Series 60 phone, which is more phone than organizer.)

Moreover, Microsoft's strong suit--software--has yet to prove that it is the defining factor in consumer preferences for mobile devices, particularly cell phones. In contrast to personal computers--which by and large were simply beige boxes, not fashion statements, when Microsoft came to dominate the PC industry--cell phones are seen as an extension of the consumer's personality.

"I haven't seen anything out of Microsoft that makes me believe that they're going to have any magic sauce," said Andrew M. Seybold, a veteran industry wireless and mobile consultant who publishes Outlook 4Mobility, a newsletter.

Several industry executives said that even if Microsoft did everything right, its fate in mobile phone software might be largely beyond its control. Consider the plight of Nokia, which failed to anticipate consumer tastes in 2004. Caught without a clamshell cell phone, the company issued a profit warning last April.

"In the cell phone industry, success has more to do with market structure than technology," said Michael Kleeman, a

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