NEXTEL MAPS OUT DATA PATH

Nextel sprang ahead with a wireless data strategy, and Microsoft hammered into the wireless industry with last week's announcement that Microsoft will invest $600 million in Nextel.

As part of the deal, Nextel will enhance its Nextel Online concept by offering customers Internet services through a customized version of the MSN portal. Customers will use handsets equipped with microbrowsers from Phone.com, formerly Unwired Planet.

"This announcement highlights one component of the vision of our newly formed e-commerce" group, said Brad Chase, group vice president of the consumer and commerce group at Microsoft.

The agreement should boost the lagging wireless data market. "It's a good step because anything that gets more people to think about wireless data is generally good for the industry," said Alan Reiter, president of Wireless Internet & Mobile Computing.

When examined closely, though, the deal seems an odd fit. "There seems to be some sort of discontinuity," Reiter said. "The problem is that portals appear to be for horizontal markets whereas people willing to spend money in wireless data are companies in vertical markets."

Nextel's customers are business users, mostly in vertical markets. Operators will have to change the perception of portals to encourage third parties to develop portal-based vertical applications for its users, Reiter said.

The deal does not indicate a change in target market for Nextel, company officials said.

Despite the stretched fit, the companies may have had good reason for teaming up. Microsoft had few choices of nationwide partners, though the company intends to partner with other wireless operators, said Chase. Nextel has a nationwide, data-ready network-something other voice wireless providers can't boast. The deal helps Nextel continue to aggressively pursue wireless data and offers a welcome cash investment.

In February, Nextel announced an agreement with Netscape for a similar offering. In light of the Microsoft deal, Nextel said it would continue to use Netscape's enterprise server, Web server and e-commerce software, but would not use Netscape's portal, as originally announced.

Microsoft's storming of the wireless industry paints an unclear portrait of its strategy. "They look to me like they're taking a shotgun approach," said Barney Dewey, consultant for the Andrew Seybold Group. The company could be investing in many ventures, hoping at least one will take root, he said.

Microsoft's other wireless ventures include Wireless Knowledge, a joint venture with Qualcomm.

Last week, Canada's Bell Mobility announced that it would be the first operator to test Wireless Knowledge's Revolv service.

Microsoft also joined the Wireless Application Protocol forum two weeks ago, after threatening to go it alone against the group.

Additionally, the company is chasing the personal digital assistant (PDA) segment, which is dominated by 3 Com's Palm and could become a significant market for wireless data.

But the shotgun approach could backfire. "Microsoft themselves are almost in competition with Wireless Knowledge," Dewey said.

Others say that Wireless Knowledge may have made a better fit for Nextel.

In addition, Dewey believes that ultimately owning the WAP space won't be all that important. Using WAP phones, customers will find they like the idea of wireless access to information. But today's handsets are clumsy to use, and may drive users toward PDAs.

1. Short messaging via on-line messaging center, on-line customer care, purchasing of phones and accessories, bill viewing and payment

2. E-mail, calendar, address book and Web-based content services delivered via co-branded MSN portal

3. Web-based applications based on the MSN portal, developed by third parties