Microsoft, AT&T Wireless in pact for mobile business

By Yukari Iwatani and Reed Stevenson

CHICAGO/SEATTLE: Microsoft Corp. and AT&T Wireless Services Inc. said on Wednesday they formed a partnership to provide data services through wireless devices to corporations. The alliance between the world's largest software maker and the No. 3 U.S. mobile telephone company marks a key step in Microsoft's strategy of taking its software beyond the desktop. It gives AT&T Wireless an edge against competitors who are rolling out advanced mobile phone networks capable of carrying data at increased speeds, analysts said.

The companies, both based in Redmond, Washington, will develop and distribute wireless devices powered by Microsoft's Windows operating system, including Pocket PCs, laptops and so-called smart phones that will allow corporate workers to check e-mail and remotely access data. "We believe it's going to appeal to the business enterprises that want to unchain their workers from the desk and let them take this intelligence with them wherever they go," John Zeglis, chief executive of AT&T Wireless, told Reuters.

AT&T Wireless, with close to 20 million customers, said it will use Microsoft's MapPoint software to offer services like instant messaging for work groups and locating contacts. Microsoft, which is already in partnership with the nation's No. 1 mobile operator, Verizon Wireless, said that with the latest deal most of the elements were in place for deploying its mobile software among consumers and businesses across the United States.

"Between the agreements with Verizon, Cingular, Sprint and AT&T Wireless, we have broad commitments from all major North American wireless carrier," said Ed Suwanjindar, a product manager in Microsoft's mobility business. "What's left is to actually go to market with these offerings."

The companies said they plan to launch some services and devices in the fourth quarter, including a PDA-cell phone, powered by Microsoft Pocket PC and other phones running Microsoft software that allow users to swap instant messages, make phone calls and access business and personal information.

Shares of Microsoft fell 12 cents, or 0.25 percent, to close at $47.98 on Nasdaq, while AT&T Wireless fell 17 cents, or 3.5 percent, to end trade at $4.69 on the New York Stock Exchange.

Software everywhere

Analysts said the deal, for which financial details were not disclosed, appeared more significant for Microsoft. "It's becoming clear that Microsoft wants to own the wireless data market like they own the desktop. " said Jeff Kagan, an independent Telecommunications analyst. "AT&T Wireless has close connections with a lot of businesses across the U.S. and it gets (Microsoft's) software front and center into a mainstream U.S. carrier," said Todd Bernier, wireless analyst with Morningstar.

Speaking at a press event to promote technology in the nonprofit sector in New York, Steve Ballmer, Microsoft's chief executive, declined to say how much revenue Microsoft thinks it can make from its wireless initiatives. "We did not give any financial projections," Ballmer told Reuters. "We're very excited about wireless data and excited about the opportunities to do that with AT&T (Wireless)."

Microsoft has said that it wants to put its software into a wide range of devices from desktop personal computers and servers to televisions and mobile phones to lay the groundwork for .NET, its 2-year-old initiative to deploy Web-based software and services. It has also signed deals with T-Mobile, Vodafone Group Plc and mm02 to sell Pocket PC-cell phones.

Since the deal is nonexclusive, it means less for AT&T Wireless, analysts said, but gave it an edge against the upcoming launch of rival Sprint PCS Group's high-speed wireless service. Sprint PCS, the No. 4 U.S. wireless operator, is expected to roll out the service in mid-August and be the first company to offer the service nationwide.

"They're probably trying to make sure that Sprint doesn't steal their thunder," Thomas Lee, wireless analyst with J.P. Morgan, said. Wireless operators are betting high-speed wireless data services will spur sales after a slowdown in customer growth. Business users are considered a key market for wireless data.

AT&T Wireless is 16-percent-owned by Japan's dominant Mobile operator NTT DoCoMo Inc. and has committed to putting out a U.S. version of DoCoMo's "i-mode", which has nearly 34 million users in Japan.

(Additional reporting by Siobhan Kennedy in New York)

© Reuters