Microsoft unveiled a new mobile phone strategy.

The software giant announced that at the Mobile World Congress being held in Barcelona, Spain, the company and its key mobile partners were unveiling new smartphones with upgraded Microsoft software.
The next generation of phones will be based on Windows Mobile 6.5, Microsoft's new version of operating system for handsets, which is expected to be available in the later half this year

Microsoft wants to create software buzz on mobiles
Microsoft CEO Steve Ballmer's mobile phone strategy: sell a lot of devices.

Even Microsoft CEO Steve Ballmer knows that it's the hardware that gets people to buy a mobile phone.

"The thing that people buzz about is the actual thing they go and buy, which is the phone, which comes from one of our partners," Ballmer said in an interview Monday.

Microsoft aims to change that with its new effort unveiled at the Mobile World Congress in Barcelona: to persuade consumers to buy smart phones - the fastest-growing segment of the handset market - because they are running Microsoft operating system.

The new software will be Microsoft 6.5 in the series _ but will be marketed to consumers simply as Microsoft Phone, with a new user interface and a new browser. Windows also is launching two new services, one that allows users to synch their text messages, photos, video, contacts and more to the Web and an on-line applications store that will bring together the 20,000 applications developed for Microsoft-based phones.

"It is important for us that we have a strong presence and position on the phone," Ballmer said.

More than 20 million devices carrying Microsoft's operating system were sold in 2008. Ballmer said he expects to grow the market share, but he declined to make forecasts.

"The most important thing we'll do is we're going to work with the guys who build phones that are exciting ... that are hot and tell the story of their Windows phone," Ballmer said. "The Windows phone from HTC, the line of Windows phones from Samsung, from LG, really getting with the partner and telling the story of the partner and their device."

To that end, key partners HTC, LG Electronics and Orange also unveiled new Windows phones based on the new Windows operating system in Barcelona. LG said it will dramatically increase the number of phones it offers running Windows, making it the primary operating system for its smart phones. LG said its volume of Windows phones would increase 10 times this year.

Telecoms operators _ notably Vodafone _ have signaled that they want fewer, not more operating platforms.

But Ballmer thinks Windows Mobile is better positioned than the other operating systems because it can run on phones for a range of prices _ from the $600 smart phone to the $250 model.

"Many phones times a small amount of money, hopefully is enough to make this all make sense," Ballmer said in an interview on the sidelines of the four-day GSMA's World Mobile Congress, where Microsoft unveiled a new mobile phone strategy.

The company that best-known for its PC software, but which has been playing in the mobile field for the last seven years, wants to persuade consumers to buy smart phones — the fastest-growing segment of the handset market — because they are running Microsoft operating system.

That may seem counterintuitive. Even Ballmer knows that hardware — not software — is what creates consumer excitement, something in shorter supply as the world economic downturn has dramatically cut consumer confidence.

"The thing that people buzz about is the actual thing they go and buy, which is the phone, which comes from one of our partners," Ballmer said in an interview Monday.

The new software will be Windows Mobile 6.5 in the series — but will be marketed to consumers simply as Windows Phone — will include a new user interface and a new browser. Windows also is launching two new services, one that allows users to synch their text messages, photos, video, contacts and more to the Web and an applications store that will bring together the 20,000 applications that have been developed for Microsoft-based phones.

"It is important for us that we have a strong presence and position on the phone," Ballmer said. While the mobile business is relatively small part of Microsoft's business, it

More than 20 million devices carrying Microsoft's operating system were sold in 2008. Ballmer said he expects to grow the market share, but he declined to make forecasts. Microsoft doesn't say how much it sells the software for, but analysts at the GSMA put it in the ballpark of $5 to $7 per handset.

"The most important thing we'll do is we're going to work with the guys who build phones that are exciting ... that are hot and tell the story of their Windows phone," Ballmer said. "The windows phone from HTC, the line of Windows phones from Samsung, from LG, really getting with the partner and telling the story of the partner and their device."

To that end, key partners HTC, LG Electronics and Orange also unveiled new Windows phones based on the new Windows operating system in Barcelona. LG said it will dramatically increase the number of phones it offers running Windows, making it the primary operating system for its smart phones. LG said its volume of windows phones would increase 10 times this year.

Telecoms operators — notably Vodafone — have signaled that they want fewer not more operating platforms.

But Ballmer thinks Windows Mobile is better positioned than the other operating systems because it can run on phones for a range of prices — from the upper $600 smart phone to the $250 model.

IDC Analyst Francisco Jeronimo said while Microsoft's numbers are pretty good, the battle for operating system (OS) dominance is still wide hope. The big industry players in the increasingly key smart phone market are Google's Android, Nokia's Symbian — which has opened up to outsiders through the Symbian Foundation — the Linux-based open-source software being developed by the LiMo consortium and Palm OS.

"Definitely, Android, Symbian and Windows Mobile will be top OS in terms of smart phones. The challenge now for Microsoft is: No one wants to pay for an OS when they have Symbian and Android for free. What is the point?"

While 20 million devices last year shipped with Microsoft's OS, Nokia shipped 17 million smart phones to western Europe alone, along with 59 million traditional devices. While the big manufacturers seem to be waiting to make their Android announcements during the second half of the year, Jeronimo said Google's open-source software is sure to be a big player in two or three years.

"Microsoft are the ones challenged now," Jeronimo said. "My question is how long will they continue with a proprietary system?"

Michael Gartenberg, vice president of strategy and analysis for Los Angeles-based market research group Interpret LLC, didn't discount the importance of actual sales. But he said the software maker still needs to build buzz among consumers, rather than relying on the device's reputation as a workhorse that synchs up well with Microsoft's Exchange server.

"I think what they're doing now is reminding the market that these devices are the intersection between business and consumer, personal and work life," Gartenberg said.