July 31, 2002 11:00 AM PDT

Microsoft targets Nokia territory

Microsoft's deal with AT&T Wireless on Wednesday shows that it is landing some punches in the fight for the business wireless user, but the pact isn't a knockout blow, analysts said.

The battle is for sales executives and other professionals needing to fire up laptops anywhere and any place. The classic "road warrior" is among the largest set of users targeted for the new mobile Web networks that U.S. carriers are now building. This small but growing class of users represents the earliest, and biggest, potential sources of new revenue, which wireless carriers are desperately trying to find.

The two Redmond, Wash.-based companies on Wednesday said they will be introducing new products primarily for the laptop-, PDA- and cell phone-carrying mobile professionals who need to be connected to the office mainframe at any time. But the deal to develop new services is non-exclusive, meaning AT&T Wireless can turn to other companies such as Nokia for products and services, analysts pointed out. Financial terms were also not disclosed.

Microsoft's efforts to capture the road warrior did take a step forward Wednesday, but it was a baby step amid a series of stumbles Microsoft has made as it tried to capture the mobile market, analysts said. For instance, Microsoft recently sold its stake in wireless software maker Wireless Knowledge, which the software giant and Qualcomm created together in 1998.

"I love Bill Gates as much as the next guy, but Microsoft doesn't know mobility," said Ed Snyder, a wireless analyst with JP Morgan H&Q. "It's like oil and water."

"While Microsoft has had great success on the wired enterprise side, there's been a lot of confusion on the wireless side," said Gartner analyst Phil Redman. He noted that Microsoft has launched a number of wireless products, "but none of them stuck. They certainly don't have a lot of experience in the wireless space."

Taking on Nokia
Microsoft's mobile rival is Nokia, which would be the main opponent for any company trying to sell mobile products and services.

The Finnish phone maker has enjoyed a near-stranglehold on the mobile market in general. It now sells 40 percent of the world's phones and cellular telephone network equipment. It also owns a large portion of the rights to Symbian, a next-generation phone platform that dominates in Europe.

On the other hand, Microsoft is a relative newcomer to the mobile field, coming from the world of wires, desktop personal computers and laptops. It introduced its first Windows-powered Pocket PC device for the United States in March.

But this outsider status is exactly Microsoft's strength, and the phone maker in Finland knows it, said Keith Waryas, a wireless analyst with IDC. By coupling with AT&T Wireless, which uses the world's most popular cell phone technology, Microsoft now has a potentially global mobile network to mobilize its Windows users, he said.

"This represents a power shift in the industry," Waryas said. "When you talk to the guys in Finland, they've got Microsoft on the brain. They are the archenemy. Microsoft is hip-checking Nokia over, closer to the sideline of data services."

A Nokia spokesman could not be reached Wednesday morning for comment.

e911 alarms are ringing
But the strength of the deal also rests on the readiness of AT&T Wireless' network for Microsoft's applications. One of the applications is an Instant Messenger program that not only tells if someone is online, but where they are.

Just like every single U.S. carrier, AT&T Wireless is having trouble meeting a federal mandate to pinpoint the location of cell phones within 100 yards. The Federal Communications Commission has given all carriers until 2005 to make it possible for police to know the geographic location of a cell phone dialing 911.

According to recent FCC filings, AT&T Wireless is having trouble meeting the mandate, reporting troubles with the technology choice it's made.

Waryas said that won't preclude them from offering so-called location-based services, but the accuracy of the locator might not be high enough to make the applications of much interest.

One particular example would be an application that gave driving directions to a lost traveler. The phone's unique ability to locate itself is key to how good the directions would be. With a very accurate location-finding, the directions start from the city block they are located on. The directions get more obscure as the level of accuracy decreases.

"To get really, really useful directions, you need this very fine level of detection," Waryas said.

 

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