Microsoft aims to be cell phone 'Survivor'

Microsoft's approach to the mobile device market is a lot like the "Survivor" credo.

On the popular reality TV show, contestants are advised to "outwit," "outplay" and "outlast" their opponents. Microsoft is aiming to do all three, though it may well succeed if it only manages the last of those tasks.

The software maker is expected next week to introduce Windows Mobile 5, the next version of its operating system for cell phones and handhelds. The OS, code-named Magneto, is the latest in a string of software releases that highlight Microsoft's attempts to take on rivals including PalmSource and Nokia.

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What's new:
Magneto, the next version of Microsoft's operating system for cell phones and handhelds, is due out next week.

Bottom line:
The release of Windows Mobile 5 further represents the Redmond giant's eye on overtaking its rivals. Will attempts to improve the operating system's design pay off?

More stories on mobile operating systems

"The business is actually doing fine and has had remarkable growth, but we're still way way the underdog there," Windows chief Jim Allchin said.

In the past, Microsoft has created different versions of its mobile software, each designed to run on a particular class of device. There were smart phones and Pocket PCs and even Pocket PC phones, but within a given category, all of the devices bore a striking resemblance.

A key goal this time around was allowing for more design variety. In an April interview, Allchin said the result would be an array of new products, some of which he called "amazing."

When it comes to the mobile-device market, analysts credit Microsoft with showing staying power. Its first devices were significantly less popular than those from Palm. The operating system had its first hit with Compaq's iPaq and eventually garnered a significant chunk of the handheld market. Meanwhile, a longstanding effort to break into phones is starting to bear fruit after some noteworthy stumbles.

"Microsoft has always been committed (to) improving the Windows Mobile experience," IDC analyst Kevin Burden said. "With each new version, they find new things they want to make better."

The company has seen its growth pick up, as well, although the mobile unit is still a tiny part of Microsoft's overall business and the division continues to lose money. Last quarter, Microsoft saw mobile-unit revenue zoom up more than 30 percent from a year earlier, to $80 million. In particular, Microsoft saw its licenses of Windows Mobile for network-connected devices more than double from last year.

While not commenting specifically on the upcoming OS release, Burden noted that Microsoft has shown its commitment to building an operating system that can be used for all manner of mobile devices. He noted that Microsoft's move comes as some companies, such as Sony, have pulled out of the slow-growing handheld market.

Imagining Magneto
As for what's in Magneto, handheld enthusiast sites have offered some indications, including one review of a leaked version of the operating system.

The review describes a number of new features, including an improved one-handed navigation of the device, a more powerful version of the mobile Word program, a viewer for PowerPoint documents and the ability to add photos to contacts allowing for photo caller ID.

A Microsoft representative declined to comment on the features or the timing of Magneto's release beyond what executives have said.

In an interview last year, the man charged with improving Windows Mobile said one of his main priorities was improving the overall quality of Microsoft's mobile operating system.

"We spent a tremendous amount of engineering resources in the last few months to make quality and stability the highest priority," said Ya-Qin Zhang, the former head of Microsoft's China research lab who now serves as a vice president of the company's mobile device unit.

Another important feature is making sure Windows Mobile-powered devices can seamlessly move

from one wireless network to another.

"The important thing is to make sure that there is seamless roaming and handover and a consistent experience," Zhang said. "That is a critical technology that we need to enable."

Although some have said Microsoft is trying to position itself as a BlackBerry killer, company Chairman Bill Gates doesn't seem to be aiming for a knockout blow.

"There'll always be tons of operating systems," Gates said in a recent interview with gizmo site Engadget. "We're trying to make the best software we can and we have no shortage of ideas where we can make that phone way better than it is today."

The company has also made a number of deals on the mobile side that seem to reflect that view. On the one hand, Microsoft has struck a deal with Research In Motion to allow the BlackBerry to run Microsoft's corporate instant-messaging technology.

At the same time, Microsoft is trying to compete with RIM both through devices running Windows Mobile and by licensing server technology to devices that run rival operating systems. Microsoft has licensed its ActiveSync technology to erstwhile OS rivals PalmOne and Symbian.

Another area analysts see as key to being taken seriously in the cell phone business is making sure the product is attractive to cell phone carriers such as Sprint PCS and Cingular Wireless. The operators of cell phone networks, more than the device makers, act as a gatekeeper to what makes it into the hands of businesses and consumers.

"It's really important for them to align their OS with the needs of carriers," said Ross Rubin, an analyst with The NPD Group. In particular, Rubin suggested Microsoft should support making changes to its operating system on the go, as well as establishing a platform for all manner of sales.

Microsoft seems to have realized this early on. The company has struggled to get many of the leading cell phone makers to embrace its operating system, but it has managed to get devices, often made by contract manufacturers, onto top-tier carriers' networks.

Analysts also point out that Microsoft doesn't have to get everything right this time around. Said IDC's Burden, "The next edition of Windows Mobile is certainly not going to be the last one."