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Microsoft Redials Phone Pursuit

WALL STEET JOURNAL
By NICK WINGFIELD and ROGER CHENG
October 12, 2010

Microsoft Corp. launched its latest assault on the crowded smartphone market, where it has struggled to gain traction, with a bevy of handsets based on overhauled software and a big advertising push.

The Redmond, Wash., company on Monday formally released its new Windows Phone 7 operating system, which it spent two years developing. During that time, it was beat to the market by competitors like Apple Inc.'s iPhone and Google Inc.'s Android software.

Microsoft Redials Phone Pursuit.

The new Microsoft software displays commonly used applications on a home screen in large blocks--dubbed tiles--rather than the array of many small icons found on competing smartphones that Microsoft contends is overly complicated. The tiles are constantly updated with fresh content from the Internet, such as status updates or new photos from a user's Facebook friends.

"This is a different kind of phone," Microsoft Chief Executive Steve Ballmer said at a launch event in New York.

While the software has been praised for its originality, Microsoft still faces skepticism about its prospects in the mobile business, after several years of missteps that gave competitors time to cement their positions in the market.

Microsoft plans to spend more than $100 million on a new advertising campaign for Windows Phone 7. The ads focus on the chaos that ensues when people become too absorbed in their smartphones, from collisions on the sidewalk to distracted dinner companions.

The point of the ads is to underscore how Windows Phone 7 is designed to let people do certain activities more efficiently without needing to constantly fumble around with their devices. The tag line of one of the ads: "It's time for a phone to save us from our phones."

All Windows Phone 7 devices also have camera buttons on them so people can quickly shoot photographs with their phones even if the devices are locked with a password.

At the New York event, Microsoft unveiled nine handsets planned for the holiday season, including the Focus by Samsung Electronics Co., the Quantum by LG Electronics Inc. and the Surround from HTC Corp. All three will cost $199.99 with two-year service contracts with AT&T Inc. when they go on sale in early November.

Wireless carrier T-Mobile USA will also sell Windows Phones 7 devices starting in November. In all, Microsoft says phones using its software will be available in 30 countries from 60 carrier partners.

Microsoft is also attempting to turn a potential liability-the small number of applications it will have for Windows Phone 7 compared with the tens of thousands of apps available for Google and Apple devices-into an advantage.

In a recent interview, Terry Meyerson, corporate vice president of Windows Phone engineering, said Microsoft will take a more active role in managing the apps available for Windows Phone 7 than its rivals do, partly to weed out "knock offs" of popular apps-say, Scrabble or Tetris games.

"Windows is a platform that cannot be ignored," Darren Cross, head of business development for Comcast Corp.'s Fandango movie ticketing service, which has developed a Windows Phone 7 app. "This is a very fresh take."

Mr. Cross said the company hadn't received any payment from Microsoft to develop the app, but he hopes the company features the app in its marketing in the future.

AT&T, which is sole U.S. iPhone carrier, plans to integrate its U-Verse home TV service with the new Windows phones, allowing customers to sign up for an entertainment plan to access cable shows found on its TV service.

The mobile service will cost $9.99 a month for non U-Verse customers, and will be free for high-end U-Verse subscribers.

Microsoft needs its new software to help reverse a slide in its share of the smartphone market, which fell to 5% world-wide in the second quarter from 9.3% during the same period the prior year, according to the research firm Gartner Inc. Android jumped to 17.2% from 1.8% and the iPhone rose to 14.2% from 13% during that same period.

Microsoft executives said they still have a big opportunity to win customers, particularly since 80% of the cellphone market hasn't yet gotten an Android device, iPhone or another brand of smartphone.

Ken Dulaney, a Gartner analyst, agreed that Windows Phone 7 will get some traction in the market. "But I think its going to take a few more iterations to get truly competitive," he said.

The launch comes as the smartphone competition has shifted to the courthouse with companies engaged in several patent disputes. Microsoft recently sued Motorola Inc., a big maker of Android phones; while Apple has sued Taiwanese phone maker HTC.



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