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Microsoft-Qualcomm venture tries to find wireless bearings

Privately held Wireless Knowledge, with significant backing from Microsoft and wireless technology company Qualcomm, has spent much of the year changing its strategy.

Wireless Knowledge believes software sales, not services, will bring it success.

The privately held wireless data company, with significant backing from Microsoft and wireless technology company Qualcomm, has spent much of the year changing its strategy.

Wireless Knowledge has morphed from a service provider into a company that sells software to businesses that want to offer their employees mobile access to email, calendar and contact information. Shelving its earlier services, called Revolv, the company now sells software called Workstyle Server that runs on Windows NT/2000 systems and enables corporations to provide wireless access to Microsoft Exchange information.

Sprint PCS, a major wireless carrier, last week announced plans to work with Wireless Knowledge to co-market and sell its software to large businesses. Analysts say the support of carriers is natural, because wireless data increases minutes of carriers' network use. But it also is critical to Wireless Knowledge's success, as the company can benefit from carriers' large subscriber bases.

Some analysts say Wireless Knowledge switched gears after carriers cringed at the company's plan to offer wireless data services for them. Originally, Wireless Knowledge planned to offer a mobile data service, but many carriers want to provide that themselves without relying on a third company that would dilute their profits.

The company's new software strategy may be viewed as less threatening to carriers and more attractive to large business customers.

"They wanted to control everything. But the service providers want to control it themselves," said Ray Jodoin, principal wireless industry analyst at Cahners In-Stat Group. "The only thing that was left for them, being a Microsoft-dominated company, was to go after the software side of it."

The plan eases businesses' concerns about outsourced hosting of wireless data applications, security and the ability to customize the software to their needs. It also draws heavily upon the expertise of Microsoft, the world's largest software company.

"It's a familiar model," said Wireless Knowledge chief executive Eric Schultz, a former Microsoft wireless executive who became CEO of Wireless Knowledge last November.

The advent of Wireless Knowledge is the result of intense interest and growth prospects for the wireless industry. Most analysts expect more than 400 million wireless handsets to be sold worldwide this year, with many of them capable of Internet access.

By all accounts the market will be huge. For example, investment bank US Bancorp Piper Jaffray expects 645 million handsets to be sold in 2003, while the Strategis Group predicts the market will increase to 1.37 billion mobile phone owners worldwide by 2007, up from 530 million today.

Wireless Knowledge see related story: Microsoft's call for wirelessexecutives say their direct software sales efforts to Fortune 1000 companies are beginning to grow. The company claims about 30 business customers, including major cable operator Cox Communications, pharmaceutical product maker Aventis Pharmaceuticals, and Pacific Coast Builders, a building materials company. Executives expect to announce a series of large customer wins in upcoming months.

Wireless Knowledge also expects to release a new version of its software during the fourth quarter, executives said. The software will include support for Lotus' Domino and Notes, a competing product to Microsoft's Exchange and Outlook. The move will expand the number of potential business customers for Wireless Knowledge.

Since Wireless Knowledge was formed in November 1998, scores of wireless Internet and email access start-ups, as well as other mobile data companies, have cropped up. Aether Systems, 724 Solutions and Etrieve, among others, offer similar wireless email or related services.

But analysts believe the pedigree behind Wireless Knowledge is likely to ensure its success, despite the early hiccups and Microsoft's willingness to work with others.

"I think they stand a better chance of surviving than most because they are backed by Microsoft and Qualcomm," Jodoin said. "They have to be given credit for changing their plan. The market evolved and they evolved with it, and they realized that their earlier mission was not the same one they needed today."

In addition to the big-name backing of Microsoft and Qualcomm, Wireless Knowledge CEO Schultz hinted that the company is considering a future strategic corporate round of funding that may include stakes from new business partners. He declined to elaborate but added that the company continues to believe a future initial public stock offering is likely.