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MS Smartphones in for a rocky climb

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CIOL Bureau
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Kirstin Ridley and Lucas van Grinsven

GENEVA: Microsoft Corp., the world's largest software maker, called on telecom companies to tap new revenue streams with its software as it stepped up efforts to muscle into a market worth more than $260 billion.



Chairman Bill Gates secured a keynote speech at the ITU Telecom World 2003 trade fair in Geneva on Monday, ahead of Arun Sarin, the chief of top mobile phone firm Vodafone Group Plc, to tout his wares.



His message: software is vital to the future of the telecommunications industry as it emerges from one of its most precipitous downturns ever.



"The thing is pretty simple. Software is the ingredient that helps continue to grow this industry," Gates said.



A few years after Gates mapped out Microsoft's plans to conquer the telecom sector, he said he could announce products and clients.



Gates, who is also Microsoft's chief software architect, paraded a range of software that spanned quality television over broadband Internet connections, a new Microsoft-powered smartphone for Orange and a deal with Vodafone for new mobile messaging and location services.



Microsoft's smartphone software competes against Britain's Symbian, Finnish handset giant Nokia and Sun Microsystem's Java.



"Four years ago we committed ourselves to the telecoms industry. What we've done in the last four years is to build software to push things forward," he said, adding that company had more than doubled its research efforts in that period.



Microsoft, which spends around $7.5 billion each year on research and development, wants to gain a foothold in telecoms as its key Windows and Office software faces saturation and increasing competition, compounded by piracy.



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The firm, which has over $30 billion in cash and plans to launch its new version of Office software on October 21, knows pay-back could be years away for its mobile phone software business and other fledgling operations.



"Everybody expects their mobile information to follow them around. Everybody expects to be able to get instant messages, to be entertained with high quality media," the senior vice president of Microsoft's mobile division, Pieter Knook, told Reuters.



But he added: "It will take five to 10 years...before everyone is going to want a (Microsoft powered) smartphone. But we're patient. This is a business that requires a lot of R&D to get going. For us, this is an investment business."



Few industry experts doubt that the commercial potential exists. Market research group Gartner Dataquest has forecast $260 billion of telecom equipment and handset sales in 2003, even excluding IT services, software and computers.



Some industry experts say Microsoft's future is riding on its success at breaking into markets such as these. In the meantime, Knook said, the software giant is losing hundreds of millions of dollars per year on honing its software.



But he is rising to the challenge. He said market research showed that mobile phone operators could boost their crucial average revenue per user if they sell phones powered by Microsoft's smartphone software.



Initial sales of Orange smartphones proved disappointing. But Microsoft says about 22 operators around the world plan to launch their versions of the phones, which allow customers to access desktop computer information, view calendars and send emails.



(C) Reuters

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