But in 2000, Engstrom walked away from Microsoft and the personal computer industry, which seemed to have settled into maturity. He founded his own company and set off to pursue innovation and riches elsewhere.
"The opportunities are out on the edge, and the edge of software development has got to be the phone," said Engstrom, 38, the chief executive of Wildseed, a start-up in Kirkland, Wash.
Engstrom personifies the migration of talent, excitement and investment in computing toward the wireless business, as cell phones become more like computers and hand-held computers morph into phones. To veterans of past cycles in technology, the wireless world today has the look of the personal computer business in the late 1970s or the Internet in the early 1990s.
"It's starting to happen, it's getting exciting again," observed Esther Dyson, who plays host to PC Forum, an annual gathering of technology executives, entrepreneurs and venture capitalists that was held late last month in Scottsdale, Ariz. PC Forum began in 1977. But now the PC stands not for "personal computer" but "Platforms for Communication."
The economics of wireless is still unclear and technology standards are not yet in place. Nor does the move to wireless computing spell the death of the personal computer, any more than the rise of the PC meant the demise of the mainframe computer. But as wireless telephony and computing combine, the center of gravity in digital technology is clearly shifting.
"People see the PC as played out, and they are looking for new technology platforms to build new businesses on," said Brad Silverberg, a former senior Microsoft executive who left three years ago and is the founder of Ignition, a venture capital firm that has invested in wireless businesses, including Engstrom's start-up.
The wireless convergence of phones and computers is made possible by steady progress in chipmaking, memory and miniaturization. Today's advanced cell phones have the equivalent computing power of the desktop PCs of the mid-1990s.
Yet while the trend of advancing technology is clear, little else is apparent. What companies, products, services and technology standards will emerge as leaders in the wireless arena is still uncertain. And that is because the real competition has barely begun.
More than 450 million cell phones will be sold worldwide this year, industry analysts predict. But less than 10 percent of those will be the cell phone-computer hybrids--sometimes called smart phones--that can handle not just short text messages, but also send and receive e-mail, display color photos and video, play music and games with rich graphics, and browse the Web.
"These handheld smart phones are the frontier, but we're just getting to the point where they are beginning to be widely distributed," said Berge Ayvazian, president of the Yankee Group, a research firm.
The wireless computing field today resembles the PC business a quarter of a century ago: People were excited by the opportunities, technology standards were not yet established, start-ups proliferated, and many failed as the economy was in doldrums.
"It feels eerily similar in some ways," said David Nagel, a former executive at Apple Computer and now the chief executive of PalmSource, whose Palm operating system is used on some smart phones. "But this new era in computing is much more complicated."
The added complexity is the result of a number of forces--government regulation of telecommunications, multiple layers of competing technologies, and an unruly crowd of major telecommunications carriers, computer companies, cell phone makers and upstarts in all these fields vying for a piece of the business.
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Competing technology standards in wireless is one source of industry uncertainty. At the level of "radio protocols" for handling calls and data exchange, there are currently two main standards--the global system for mobile, or GSM, and code division multiple access, or CDMA.
Qualcomm, a wireless technology company based in San Diego, developed CDMA, and its users include Sprint, Verizon Wireless, all of South Korea, and several other companies overseas. GSM was a standard nurtured in Europe, and its champions include Nokia and other European companies, AT&T Wireless, Cingular and T-Mobile in the United States. About three-fourths of cell phone subscribers worldwide use GSM. In the United States, about 40 percent of subscribers use CDMA.
Meanwhile competition for the software to animate the new hybrid computer-phones is just getting under way. An early leader is the operating system made by Symbian, a British company with several cell phone makers as investors, including Nokia, Motorola, Siemens and Sony Ericsson. But Microsoft is pushing its Stinger operating system, Qualcomm has Brew, PalmSource offers Palm, and the freely distributed Linux is starting to gain adherents, too. Sun Microsystems and IBM are promoting software based on Java, which Sun created, as a layer that can run on any operating system.
These different approaches--whether operating systems or Java--are a step toward a more "open" technology platform for the cell phone business. In the past, each cell phone maker typically had its own embedded operating system tailored for its phones. The new generation of wireless operating systems can run on devices made by various manufacturers.
In the PC industry, the business took off when software developers had a standard operating system that ran on standard silicon chips, which became a technology platform on which many thousands of applications, from business programs to games, were built. Those standards for the PC industry came to be dominated by Microsoft's Windows operating system and Intel's microprocessor.
In wireless computing, most analysts expect the number of software platforms to diminish over the next few years, but with no single technology ruling the industry as Microsoft does in PCs. Indeed, Microsoft's strength in the PC market has somewhat worked against it in the wireless field as handset makers in particular seek software alternatives like Symbian and Java. Cell phone makers say they want to avoid being beholden to Microsoft, which owns the crucial Windows software for PCs and collects much of the industry's profits.
Sun estimates that 75 million cell phones with Java technology were shipped last year. "We're way ahead of Microsoft in the wireless market," said Mark Tolliver, Sun's chief strategy officer. "We're building a big platform, attracting a developer community and creating a business opportunity for companies in the wireless industry."
Microsoft, too, sees plenty of opportunity. Its strategy seems to rely on bringing the familiar desktop functions of e-mail, address lists, calendar programs and Web browsing to the new smart phones. It hopes eventually to persuade a portion of the millions of software developers who write programs that run on Windows, mostly specialized software for use inside corporations, to write applications tailored for Microsoft's smart phone operating system.
"We're all entering a market that doesn't really exist yet," said Ed Suwanjindar, a product manager at Microsoft.
Indeed, there are many obstacles still to be overcome. Financially strained telecommunications companies have been reluctant to invest in the high-speed wireless technology needed to deliver video clips and other multimedia to smart phones with color screens. One of the reasons European carriers are so burdened with debt is that they spent more than $100 billion merely to license the radio spectrum needed for high-speed, third-generation wireless, or 3G. South Korea and Japan are the leaders in embracing 3G technology.
As a less-costly transition step, a number of companies are working on software that would link cell phone networks with Wi-Fi, the increasingly popular technology that uses unlicensed radio spectrum to deliver high-speed Internet access wirelessly to notebook computers. The software would allow high-speed links near local Wi-Fi hubs and lower-speed connections to the Internet elsewhere in a service described as "seamless roaming" by Rod Atkins, general manager of IBM's pervasive computing unit.
The entrepreneurial programmers writing for the wireless market want their software, from games to business applications, to be distributed as widely as possible.
"We're on the cusp of the mobile Internet experience, but the key is going to be making sure the technological architecture of this world is open," said William Plummer, Nokia's vice president for government and industry affairs. "The better it is for developers to write programs or services that work with many handsets and across networks globally, the better off we will all be."
Last June, the Open Mobile Alliance was created to further that goal. Its 16 founding companies include Nokia, Motorola, IBM, Microsoft and Sun, and the alliance now has 300 corporate members. The group is pushing to reach agreement on technology standards so that wireless computing can, like the Internet, work as an open network where data, voice and video can be passed among many telecommunications carriers and devices. A year ago, for example, it was difficult to send short text messages between carriers. No longer.
Today, multimedia messages carrying photos, animation or music files can only be exchanged with someone who has the same kind of cell phone over the same network. Within a year, that barrier may also fall away.
Start-ups like Wildseed see enough promise in the wireless sector to press ahead. The company has designed specialized software and cell phone "skins" that change the look and operation of a smart phone so that it can combine a phone with a gaming machine, music player or video platform--tailored to a person's favorite games, rock stars, sports teams or fashion tastes. Besides having different colors and styles, the skins, or faceplates, also have embedded chips storing specific Wildseed software. Its backbone software is also loaded on the cell phone.
The company hopes to attract 12- to 24-year-olds, and its first products are coming to market later this year on smart phones made by Kyocera Wireless of Japan and early next year by Curitel of South Korea. Wildseed plans to charge $25 to $50 for its themed "smart skins" as well as charging carriers and cell phone makers a license fee for its software.
While expectations are high, there's also a healthy dose of realism in the wireless world. As Michael Kwatinetz, who for years was a leading PC analyst on Wall Street and is now one of Wildseed's venture backers, observed, "You can get the trends right, but the timing wrong."
The operating style for start-ups these days is far different from the free-spending days of the dot-com boom years of the late 1990s. On the subject of company perks, Todd Ferkingstad, a 33-year-old engineer who left Microsoft to join Wildseed, cited the takeout dinners provided on "work-late Tuesdays," when the programmers stay into the night. "That's about as extravagant as we get," he said.
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