Baby Bills, Nanosofts & Wireless

Although the wrap-up of round one of U.S. vs. Microsoft appears near, how the proposed breakup might affect wireless remains unclear. The Computer and Communications Industry Association, which includes AT&T, Bell Atlantic, Nokia and SBC Communications, submitted a brief suggesting that Microsoft be split into three companies: browsers, applications and operating systems (OS). The plaintiffs propose a 2-way split: OSS business and applications.

This proposal means that Mobile Explorer and Windows CE would be marketed separately.

"Ultimately, the carriers will benefit," said Andrew Cole, Renaissance Strategy wireless-practice head, who added that Windows CE hasn't been a popular OS. "Windows CE is too complex and not what's needed. Microsoft tried to enter the wireless market with an Internet wireline hat on. They did not understand the idiosyncrasies of wireless."

Cole also said that Microsoft hasn't been making much headway with CE because of what he called the fear factor: Service providers have formed an unwritten alliance against Microsoft because of what are perceived as bullying business practices.

"If anything, a breakup will make it easier for Microsoft to sell," Cole said. "The fear factor will be eliminated."

Although Windows CE isn't as ubiquitous as its other OS and applications, Microsoft has been making a concentrated effort to form bonds with wireless-service providers and vendors over the past two years. It teamed with British Telecom (BT) in 1999 to develop mobile Internet, intranet and data services, and it invested $600 million in Nextel and teamed with the provider to deliver a co-branded version of the MSN Internet portal. A partnership with Ericsson will develop and market mobile e-mail solutions and the Mobile Explorer microbrowser.

This year, Microsoft allied with Qualcomm to hone and market next-generation mobile devices, including smart phones and PDAs, that will feature Microso ft's microbrowser. Another alliance combines the software company with BT and AT&T Wireless to collaborate on mobile multimedia services. These alliances place Microsoft's microbrowser and services in tandem with the CDMA and GSM technologies and give it a toehold in the next-generation mobile multimedia market.

It's too early to say how the breakup might affect the wireless sector, said Phillip Redman, Gartner Group senior analyst. But his forecast is optimistic.

"Windows CE is going to have a very strong showing compared to Palm's OS and Symbian's, because Windows CE is a very strong OS," he said. "It works well on a thin device but offers robust applications and integration to more advanced systems while still providing the familiar look and feel that many Microsoft users know."

At press time, Thomas Penfield Jackson, the judge in the Microsoft antitrust case, was awaiting Microsoft's comments regarding the plaintiffs' revised proposal, submitted on May 26. The next steps in the case will likely be a ruling, followed by an appeal by Microsoft. An appeal could go on for years, plenty of time for the company to build more relationships in wireless.