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OS-enabled phones to shake up mobile market

Sales of mobile phones that include a PC-like operating system are rapidly rising--and Linux is an up-and-comer in the market.

Sales of full-featured handsets--mobile phones that include a PC-like operating system--are rapidly rising, and Linux is an up-and-comer in the market.

Market research firm Zelos Group predicted that over the next two years, Microsoft will give smart-phone software maker Symbian a run for its money for top honors in the market. But in the long run, the software giant will be limited by seeking a premium for the Windows brand and by promoting its proprietary standard for the handset software, Zelos said Monday.

The market researcher forecast that at least 5 million Windows mobile devices will ship in 2004 but that Microsoft may not succeed in meeting its target of shipping 100 million units by 2007.

"Symbian beats Microsoft due to the flexibility of its licensing terms," Seamus McAteer, a senior analyst at Zelos, said in a statement. "Microsoft's prospects will be stymied to an extent by its desire to strictly manage how its brand is used.

The long-term prospects for open-source operating system Linux, meanwhile, are strong, Zelos said. In considering five criteria--business viability, completeness, cost, end user appeal and openness--Linux scored highest on the two that matter most to manufacturers and carriers: openness and low cost, whereas Microsoft scored lowest in these criteria.

So-called full-feature handsets are based on operating systems such as Palm, Linux or Windows Mobile, McAteer said, meaning that consumers can more easily upgrade the phones' software beyond what's now capable with Qualcomm's binary run-time environment for wireless or Sun Microsystems' Java. He shied away from using the term "smart phone," arguing that all mobile phones now incorporate a higher degree of intelligence than earlier generations.

Zelos said sales of full-feature handsets will surpass those of PCs in 2006, when those handsets will be available for as little as $157, only slightly above the average price of $138 for a mobile phone. In 2008, shipments of full-feature handsets will rise to about 290 million, according to Zelos, making up about 43 percent of global handset sales.

Such a trend could be "disruptive" to the wireless, personal electronics and computing segments, as consumers adopt full-feature handsets in place of mobile devices such as personal digital assistants, digital cameras, game consoles and music players, the research firm said. An early indication of this is Nokia becoming a leading distributor of digital cameras, Zelos said.

The shift is likely to prompt companies such as Sony, Apple Computer, Nintendo, Hewlett-Packard and Casio to add features such as wide-area network connectivity to their more specialized devices.

"As handsets with multiple gigabytes of storage are launched in the next two or three years, it is possible to envision, for example, Hewlett-Packard launching an iPod with an integrated (Wideband Code Division Multiple Access) transceiver and dual-use headset and speaker," McAteer said.