Sendo accuses Microsoft of dirty tricks

In its lawsuit against the software giant, the U.K. mobile phone maker alleges that Microsoft stole customers and technology in order to gain entry to the mobile phone market.

Matthew Broersma Special to CNET News
3 min read
In a lawsuit filed late last week, U.K. mobile phone maker Sendo is accusing Microsoft of using the smaller company as a stepping-stone into the lucrative mobile phone market.

The British company says Microsoft made use of Sendo's handset-manufacturing expertise and then cutting Sendo out of the picture. The filing provides a glimpse, albeit a partial one, into the battles going on behind the scenes as software makers, mobile phone manufacturers and network operators scramble for a place in the nascent market for so-called smart phones.

The mobile phone industry is a prize worth fighting for, shipping 400 million units a year.

In the filing, Sendo claims that Microsoft lulled the company into a false sense of security by assuring that Sendo would become Microsoft's main hardware partner once its smart phones--based on software called Windows Powered Smartphone 2002--hit the market. However, once the Microsoft smart phones launched, Sendo found itself sidelined, the filing alleges.

"Microsoft's secret plan was to plunder the small company of its proprietary information, technical expertise, market knowledge, customers and prospective customers," the filing said. "Microsoft gained Sendo's trust and confidence through false promises that Sendo would be its 'go-to-market-partner'."

When Microsoft first began demonstrating its handset--then code-named Stinger--to journalists, about two years ago, it used Sendo prototypes. Throughout the development process, industry observers expected that Sendo's handset would be the first Stinger phone.

However, last year a different model emerged on the scene--a handset code-named Canary and manufactured by HTC, a Taiwan-based contract manufacturer. HTC is best known for Hewlett-Packard's iPaq handheld computer and O2's xda, a combination PDA-mobile phone.

At Microsoft's official launch in October, it was the Canary, not Sendo's Z100, that became the first Windows smart phone. The Canary is sold as the SPV (Sound Pictures Video) by France Telecom-owned Orange. Two weeks after the launch, Sendo unexpectedly ended its relationship with Microsoft and canceled the Z100.

Sendo's filing says that Microsoft, as an outsider in the mobile phone industry, first approached Sendo in order to make use of the company's technical expertise and relationships with network operators. Once it had established its own relationships and made off with Sendo's technology, the software company turned to contract manufacturers who would fit in more easily with Microsoft's smart-phone plans, Sendo alleges.

"Microsoft provided Sendo's proprietary hardware expertise and trade secrets to low-cost original equipment manufacturers (OEMs) who would not otherwise have had the expertise to manufacture handsets that would use (Smartphone 2002) and used Sendo's carrier-customer relationships to establish its own contractual relationships," the filing said.

"Microsoft used Sendo's knowledge and expertise to its benefit to gain direct entry into the burgeoning next-generation mobile phone market and then, after driving Sendo to the brink of bankruptcy, cut it out of the picture."

A high-profile arrangement with Microsoft would have been attractive to Sendo, a small Birmingham, England-based mobile phone start-up formed in 1999 by mobile phone industry veterans.

Microsoft declined to comment on the case. Sendo said only that it believes the allegations are substantial.

Currently, mobile phone manufacturers and network operators are the dominant players in the mobile phone industry, with software playing only a minor role. Microsoft's stated aim is to model the smart-phone market on the PC industry, where the hardware is more or less the same, and customers base their choice on price and on the software platform.

Because of this approach, Microsoft's advances have been shunned by all of the largest mobile phone makers except for Samsung, which has instead chosen the Symbian OS for its more advanced handsets. Samsung is to produce both Symbian and Windows models.

So far, the most popular handsets are still those which do not rely on an advanced operating system for their functions. The only "next-generation" feature to have been marketed to a mass audience has been picture messaging, officially known as Multimedia Message Service (MMS), which does not require a smart-phone operating system.

ZDNet U.K.'s Matthew Broersma reported from London.