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Microsoft lands Motorola contract

A beautiful friendship * Motorola is the world's No. 2 handset maker. Microsoft is the worrld's largest computer-software firm. * Motorola will be the first firm to sell a Microsoft-based handset in the US. * Microsoft's mobile software division lost US$157 million on sales of US$156 million in the year ended June 30. * Nokia and Motorola together founded Symbian Ltd five years ago in an attempt to develop software for mobile phones. Source: TT

Microsoft Corp won its biggest cellular-phone software client as Motorola Inc agreed to make a phone with the programs, the first major manufacturer to do so in the four years since Microsoft unveiled the software.

Motorola, the world's No. 2 handset maker, will produce a phone with programs for Internet browsing, e-mail and scheduling that uses Windows Mobile Soft-ware, said Vince Mendillo, director of Microsoft's mobile devices program. AT&T Wireless Services Inc and Orange SA will sell the phones.

"To say Microsoft hasn't had much traction in this market is an understatement," said Greg Tuorto, technology analyst at Guardian Park Avenue Funds, which manages US$3.5 billion and owns Microsoft shares.

"Anything they can do in a high unit growth market like cellphones is a positive," he said.

Microsoft and Motorola both face their biggest threat in the cell-phone market from leading handset maker Nokia Oyj, which also makes phone software, and working together may help them win business, analysts said.

Researcher IDC expects 30 million of such feature-packed phones, dubbed smartphones, to be sold next year, more than twice the number forecast for this year.

The Motorola phone will be the first on sale in the US with Microsoft's programs, announced in 1999. The first Microsoft-based phone went on sale in Europe in last October, and the software maker has 5 percent of the European smartphone-software market, according to market researcher Canalys.

No. 3 handset maker Samsung Electronics Co initially announced plans to sell a Microsoft-based phone in 2001. The company reiterated that plan last year, and Mendillo says the companies are "still working on it." He declined to say when it would be available.

Microsoft's mobile-software division had a loss of US$157 million on sales of US$156 million in the 12 months that ended June 30.

Motorola last month pulled out of the Symbian Ltd venture it helped found five years ago with Nokia to develop software for mobile phones. Nokia had increasingly been dominating Symbian, analysts said, and Motorola needs other software programs to compete with Nokia.

Nokia, whose global market share of 33 percent is more than double Motorola's, is spending twice as much on marketing in the US this year to close the gap in Motorola's home market.

Motorola controled about 33 percent of the US market last year, compared with Nokia's 30 percent, according to Gartner Inc.

"Clearly Motorola wants to differentiate its products from Nokia, and it seems like Symbian is becoming a Nokia platform," said Brian Modoff, an analyst at Deutsche Bank Securities who rates Motorola "sell."

AT&T Wireless, the No. 3 US mobile-phone company, will begin selling the Motorola phone in the fourth quarter, several months later than the company originally expected. Spokesman Jeremy Pemble declined to say what the phone will cost.

Orange, Europe's No. 3 mobile-phone operator, plans to sell the phone beginning in October for ?239 (US$382.93).
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