Microsoft's phone news at CES

No Zune phone? Not news. But Microsoft might use CES as an opportunity to announce new software and services for Windows Mobile, and Zune might be part of the mix.

As one of my colleagues put it the other day, Microsoft killed the rumors that it's building a Zune phone, but it didn't drive a silver stake through their heart and bury them at a crossroads at midnight. In other words, until Microsoft makes some kind of phone-related announcement, misinformed analysts and news outlets will continue to speculate that there's going to be a Microsoft-built Zune phone, and Microsoft spokespeople will continue going on the record with vehement denials.

Danger built the Sidekick, but Microsoft was mostly interested in the company for its services expertise. CNET Networks

This is getting silly. I've been saying since February that the most likely course of action for Microsoft to take is to build a Zune client for Windows Mobile. Not a Zune phone.

Why? Because Microsoft--unlike Apple, and Research in Motion, and Nokia--isn't a hardware company at its core. Microsoft only builds hardware when it can't get a partner to do so (Xbox--who'd take the per-console loss?), or when it feels that partner products aren't getting enough traction and thereby letting a competitor build a threat to Windows. It built Zune because the iPod was slaughtering all the Windows Media-based players, revitalizing Apple and getting consumers to take another look at the Mac. (Sure enough, Apple's now the fastest-growing computer manufactuer in the U.S. and has taken a couple points of market share away from Windows-based PCs.) Microsoft briefly built wireless home routers because it felt partners weren't making them easy enough to set up on Windows, especially compared with Apple's Airport. And way back when, the company originally built keyboards and mice to promote Windows, and found that it was a profitable little business.

Windows Mobile may have stalled in the water while the iPhone and RIM phones have continued to take market share, but to Microsoft, 11% global market share and 16 million units a year isn't unsuccessful enough to kill the platform and change strategy completely.

So let's assume the rumors are based in fact and that Microsoft is going to make some sort of phone-related announcements at CES. (I haven't been briefed on any such announcements, so this is all speculation on my part.) Befitting Microsoft's new self-image as a software plus services company, I would expect the company to announce new and refreshed software and services for mobile phones. Specifically, a Zune client that connects to the Zune Marketplace, plus a revamp of the historically lame MSN/Windows Live services for mobile.

Recall that Danger--the company Microsoft acquired last February --has some expertise in services. The company's Danger Service automatically backs up e-mail and photos in an online repository, pushes e-mails out to the device, offers remote storage for games and other apps, and synchronizes everything between the mobile device and a PC. In other words, everything Microsoft's been saying under the "software plus services" rubric for the last couple years.

I imagine something like this Danger Service renamed under Windows Live for Mobile brand, with more connections to relatively new services like Windows Live Photos, and perhaps new client pieces as well. Music will be part of the picture, but this is more about mobile than Zune.

That said, Microsoft might not announce any of this at CES, but might wait for a more mobile-specific conference.

 

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