Ballmer banks on Windows Phone 7 for the future

Microsoft is redialing its wireless strategy with a new version of its operating system that its CEO hopes gets it back on track as a smartphone leader.

Microsoft CEO Steve Ballmer takes the stage at Mobile World Congress in Barcelona to unveil the new Windows Phone 7. Marguerite Reardon/CNET

BARCELONA, Spain--Steve Ballmer hopes "7" will be Microsoft's lucky number as the company restarts its mobile business with the release of Windows Phone 7.

On Monday, the CEO of Microsoft and his team of Microsoft executives took the wraps off the latest version of the Windows Mobile operating system at a press conference here at the Mobile World Congress. The new Windows Phone 7 is a fresh start for the company in mobile.

"There's no question that a year and a half ago we had to rethink everything," Ballmer said.

Instead of revamping Windows Mobile software, which first came out in 2002, Microsoft decided to start from scratch. The result is a completely new look and feel to previous generations of Microsoft Windows Mobile software.

The new Windows Phone 7 is primarily designed for touch-screen smartphones. It offers graphic "tiles" that let users get multiple views of their information. The goal was to create software, and a user interface, that was much more useful--and intuitive. For example, the new software integrates data such as pictures, e-mail, music, video, and contact numbers from the phone and other places (social-networking sites or multiple music services or e-mails) into easy-to-access "tiles" or virtual buttons on the phone.

Microsoft shows how the new Windows Phone 7 software lets people access pictures from multiple social-networking sites. Marguerite Reardon/CNET

Even though Microsoft is still a leading provider of smartphone software, its market share has slipped over the past several quarters. Competitors such as Apple with the iPhone, Research In Motion with its BlackBerry devices, and now Google with Android phones, have taken share away from Microsoft.

Apple and RIM have taken a different approach to the market than Microsoft has. Those companies build both the software and hardware for their phones, which has provided them more control and some edge in terms of getting new features out across an entire product line. It's also made it somewhat easier for developers to come up with new applications for these devices.

Andy Lees, senior vice president of mobile communications for Microsoft, admitted during the press conference Monday that Microsoft had questioned its strategy of not building its own hardware and instead selling software to phone manufacturers.

"We considered a lot of different things over the past year and a half to two years," he said. "We even considered building our own phone."

Instead, Lees said the company decided that working with partners offered far more value.

That said, Microsoft recognizes the need for more hardware consistency, and it plans to work closely with hardware manufacturers such as LG, Samsung, HTC, Sony Ericsson, and others to make sure there is commonality in devices. For example, Microsoft is setting standards within its partner group for screen size. It will also require that devices use the same kind of sensing technology.

In addition, it's working with carrier partners to ensure more consistency in service offerings.

From a developer's perspective, this sounds great. But it also sounds like it limits manufacturers and carriers when it comes to how they can differentiate their products. And it's unclear how handset manufacturers--which are already struggling to differentiate their products from one another--will handle the requirements.

On Sunday, at a press event here, Sony Ericsson's CEO said the company plans to eventually become operating-system-agnostic, providing consumers with a user interface that has a look and feel unique to Sony Ericsson.

Ballmer argued that the new version of its OS will offer stricter sets of criteria for devices and services using the software, and that would ultimately lead to more innovation from its partners.

"We needed a model to raise the bar and give our partners a chance to show their unique capabilities," he said. "I think it will create a bigger pool of opportunity for everyone. And when we look back, there will be greater diversity and innovation when you work from a higher foundation instead of everyone replumbing things from the lower levels of user interface."

The new Windows Phone 7 phones are expected to hit the market in time for the 2010 holiday shopping season, Ballmer said. He also said AT&T and Orange have been selected as special carrier partners. The company plans to deliver Windows Phone 7 devices on all four major U.S. carrier networks.