Microsoft wants your cellphone

The software king has big plans for making the world of mobile phones safe for Windows. Can phone makers, and a little Norwegian company called Opera, stop the onslaught?

Published November 21, 2002 2:30PM (EST)

When Jon von Tetzchner travels from his home in Norway to the United States, he often carries with him a small black bag stuffed with about a half dozen cellular phones. The phones are of various models, sizes and colors, and they're all brand-new and as stylish as they come -- sleek, tiny brushed-steel and translucent-plastic devices that are probably at the center of many cell-addled Euro teens' most lurid tech fantasies.

Von Tetzchner -- the CEO and co-founder of Opera software, which makes a commercial Web browser with a reputation among chic geeks of being one of the best alternatives to Microsoft's Internet Explorer -- doesn't bring the phones with him just to burnish his image. The gadgets serve a business purpose. Opera has just released a new Web browser for tiny devices, and von Tetzchner needs all those phones to prove that his software will work on just about anything. Microsoft's browser will work only on phones powered by Microsoft's cellphone operating system -- and von Tetzchner considers that a significant limitation for Microsoft as well as a significant opportunity for Opera.

But when von Tetzchner demonstrates his browser on each of his favorite phones, as he did for me in San Francisco this fall, it's not hard to see that he also loves the devices because they make him look good. Von Tetzchner, who is 35 and has an air of carefully cultivated dishevelment, with mussed-up short hair and a three-day stubble goatee, doesn't think of a cellphone as merely a machine to house his code. He revels in the differences between the phones, in the interfaces, the lines, the screen sizes. That's why when he shows off his software, he brings five or six phones instead of just one. He knows that to someone buying a cellphone, design and brand matter quite a bit -- maybe more than price and feature set. A phone, like a pair of shoes or a car, and unlike a PC or a coffeemaker, is a personal device, a fashion accessory that says something about its owner.

In 1998 Nokia, the world's largest phone maker, released its phenomenally successful 5100 series, which featured interchangeable faceplates. Since then phone makers have recognized that one way to sell a lot of cellphones is to appeal to consumers' aesthetic sensibilities. But von Tetzchner believes that the personalization in phones should extend beyond the hardware and into the software. Why should the Web browser on Eminem's cellphone look like the browser on P. Diddy's? And shouldn't the operating system in either of their phones be different from the OS in, say, Gene Simmons' phone?

That's where von Tetzchner sees an opportunity to beat Microsoft in the cellphone business. This fall, Microsoft released its first "Windows powered" phone, the SPV, which is being sold by the British phone carrier Orange. The phone has a color screen, Windows XP's bubbly look and feel, and a powerful processor to allow for multimedia applications like Web and e-mail browsing, instant messaging with pictures, and some PDA-type calendar and address features. The SPV is meant to compete with similar "smart phones" being released by all major cellphone makers; the wireless industry expects these high-end devices to become a big part of the market during the next few years.

Because these new phones will also run applications from third-party vendors, much as your desktop computer does today, smart phones may usher in a whole new software industry devoted to building programs for tiny devices. But the question of who will make the big money in this business hangs on who wins the emerging fight over the market for the operating systems for the new phones. In a press release announcing Microsoft's phone, Steve Ballmer, Microsoft's CEO, suggested that Windows might have the upper hand because cellphone users would take to its "familiar and powerful software experience."

But von Tetzchner and Microsoft's competitors in the wireless industry believe exactly the opposite. Cellphone users don't want a familiar software experience. They want a unique, personalized experience. Nokia, Sony Ericsson, Motorola, Matsushita and Siemens -- which together account for more than 60 percent of all phone sales in the world -- are all large stakeholders in Symbian, a company in the U.K. that builds operating-system software for smart phones. Symbian licenses its software to phone makers for use in smart phones, but it doesn't require those firms to use the code in any set way. The companies get access to Symbian's source code, and they're allowed to tweak any bit of it they like, in order to make smart phones that are compatible across vendors yet offer a look and feel unique to a single device. And, to underline the rivalry between von Tetzchner and Microsoft, Opera is the default browser for Symbian.

There's now some indication that Symbian's model may be winning early battles in the marketplace. A number of the largest phone makers have already released Symbian-based smart phones, and Nokia says it will sell as many as 10 million of them by year's end. But Symbian's biggest victory came early in November, when Sendo, a British handset maker that was one of the first companies to sign on with Microsoft, abruptly announced that it would no longer build a Microsoft phone. Instead, Sendo said it would now start working on a smart phone using software from Nokia and Symbian, software that Sendo calls "uniquely flexible."

Microsoft calls Sendo's decision "baffling," and it insists that its software is as flexible as anyone else's -- but others in the cellphone business aren't sure whether to believe Microsoft. Von Tetzchner, for example, says that phone makers are deathly scared of Microsoft because they know the company's history: If Windows is allowed to become the dominant brand in cellphones, the handset industry could go the way of the PC industry -- in which hardware is considered an interchangeable, brand-less commodity.

Von Tetzchner is a competitor of Microsoft, and because his company is betting heavily on Symbian's success, his views are tinged with personal profit -- but he still makes sense. Perhaps Microsoft will become a major provider of cellphone software, as some observers expect, but its chance of taking the whole cell market is slim; Microsoft's aggressive behavior in the desktop world, as well as its determination to push the Windows look and feel in other markets, has made manufacturers of cellphones -- the most popular electronics devices in the world -- wary of taking its call.

By most accounts, Microsoft won the Web browser wars over Netscape. But if you ask Jon von Tetzchner how he can be sure that Opera's Web browser is better than Microsoft's, he'll look at you as if you've said something absurd. To von Tetzchner, the so-called browser war is just now heating up, and Microsoft has most certainly not won the contest. If you press him on the issue, he'll concede that Microsoft may enjoy a seemingly indomitable 90-plus percent share of the browser market -- but that's only on desktop computers, where Microsoft has an operating-system monopoly. On cellphones, where Microsoft and Opera will start off on a level playing field, Microsoft will have to compete on the merits of its software. And Opera will win out, von Tetzchner insists.

Von Tetzchner was in California in October to announce that Opera had solved one of the biggest problems of bringing the Web to cellphones -- fitting a page designed for a desktop monitor onto a few-inch-square LCD screen. During the last few years, engineers at the world's telecom firms and their industry standards bodies have been working at the same problem, and so far they've produced software that leaves a lot to be desired. The two main competing methods for accomplishing the same thing so far, WAP and imode, have essentially offered a watered-down version of the Web to phone users; most of the design features coded in HTML are truncated from the wireless version.

But the bigger color screens on smart phones, along with a larger allocation of memory in the devices, mean that the phones can now include browsers that display the "real" Web, von Tetzchner says -- pure, undiluted HTML.

Microsoft's smart phones ship with Pocket Internet Explorer, a slimmed-down version of the desktop browser that enables color surfing of almost any page on the Web. (Some Web features, like Flash and Java, will not work in Pocket IE.) The trouble with Pocket Internet Explorer, though, is that Web pages coded for a desktop screen are displayed on a phone's screen at close to full size, a situation that requires users to do a lot of clumsy left-to-right scrolling.

In Opera, engineers have solved the scrolling problem with something they call "small-screen rendering," in which HTML code is "massaged," von Tetzchner says, "so that it can fit on the screen." The results are intriguing; by examining the structure of the page, the browser produces a small-screen version that includes all the important content but requires only vertical scrolling. The system probably won't work for every Web site, but for the many sites that are set up as an index of links -- Salon's or any news site's front page, for example, or any blog, e-mail portal or e-commerce site -- it produces perfect results. (Here is a small-screen example of's front page.)

Opera's innovation did not go unnoticed. The tech media picked up the story, with some on Slashdot predicting that the technology would propel Opera ahead of Microsoft in the mobile market. Tech analysts, too, said the system could provide a big boost to Opera's fortunes.

That analysis didn't come as a surprise to von Tetzchner, who has all but bet the company on the coming age of non-PC browsing. Although he says that Opera's desktop browser is more popular than ever, with about a million people downloading it each month, for the past two years the company has made more money from its licensing deals to phone and TV providers than from the desktop market. "We believe that more and more people will be using the Web in planes, cars, everywhere," he says. "This is going to be big. And this is the place that we can make the most money."

That prediction is contingent on Microsoft's smart-phone strategy failing to take off, and von Tetzchner realizes that waiting for Microsoft to fail does not make for the best of business prospects. Still, he says, "I'm not a quitter."

In 2000, when Microsoft began to suggest that it was thinking of entering the phone business, few people in the wireless industry knew how to handicap the company's odds of doing well. On the one hand, whenever Microsoft enters a new marketplace, it faces strong opposition from entrenched businesses who are rightly scared of its power. On the other hand, Microsoft is Microsoft; it's got money, contacts and technology that people know, and anytime it enters a market, competitors tend to take it seriously.

As far as it's possible to tell, Microsoft seems to have guessed from the beginning that the large phone makers wouldn't accept Microsoft with open arms, and it instead decided to try to attract smaller phone makers and the large cellular phone carriers. (Microsoft declined to discuss its broad phone strategy with Salon, but one of its mobile-product managers did answer some specific questions via e-mail.)

Microsoft has signed agreements with almost two dozen phone carriers around the world, including some of the largest -- AT&T, Cingular, Sprint, T-Mobile, Verizon and Vodaphone. Several of these have also pledged to release Microsoft smart phones -- but in what must be a novel experience for Microsoft, none of the agreements are exclusive.

"At the end of a day the operators don't care which operating system is on their platform," says Eden Zoller, the director of wireless research at Ovum, a tech research firm in London. "They're really quite promiscuous -- they'll go with anyone and wait to see what has critical mass in the market."

For Microsoft to gain critical mass, it obviously had to have phones out in the marketplace quickly, and in 2000 it set about signing up phone makers. Samsung, the world's third-largest handset manufacturer, was its biggest catch; the company has already unveiled its smart phone and "is making great progress towards the delivery of their device," according to Ed Suwanjindar, Microsoft's product manager of mobile devices. Microsoft also has deals with Compal and HTC, two big Taiwanese manufacturers; the smart phone released by Orange was made by HTC.

But Microsoft has clearly been uneasy over what has so far been a slow rollout of its smart phones. Perhaps in response to that, in July 2001 the company invested an undisclosed sum in a small, relatively unknown British phone maker named Sendo. It's not known for sure why Microsoft felt it needed to invest in a firm that had already agreed to release its products, but it appears that Microsoft was worried that Sendo wasn't moving fast enough in the development of its smart phone, called the Z100. Phil Holden, a director of Microsoft's mobility efforts, told that the investment in Sendo would "give us the ability to work even closer on development and hopefully bring the product to market very quickly."

But Microsoft's partial ownership of Sendo doesn't seem to have made things faster, as Sendo kept pushing back its release date. Originally scheduled for release in the fall of 2001, many observers were saying that they were sure that Sendo would put out its Z100 by the end of 2002 at the latest.

And then in November Sendo suddenly said it would call the whole thing off. It put up a short notice on its site expressing regret over the decision, without explaining it. And everyone in the smart-phone business, including Microsoft, was left scratching their heads.

Marijke van Hooren, a spokeswoman for Sendo, was distressingly vague when asked about the details of her firm's decision. "The good news is, Nokia gives us access to the source code, which allows us to customize the phone to far more operator customers," she said. Then she added: "There were naturally other reasons why we had to take this course of action, but from a legal perspective I cannot go into that."

Was it a technology problem -- did Microsoft's software work? "It was a not a technology issue," she said. "I cannot go into all the details about it, but our business model is to offer very customized phones so they have something to distinguish themselves in the marketplace, which we cannot offer if we don't have the source code."

Microsoft dismissed this explanation. In an e-mail, Suwanjindar said that Microsoft's "shared source" model "provides partners with the APIs [application programming interfaces] they need in order to customize and develop applications for our platform."

Zoller, of Ovum research, says that she's heard from people at Sendo that it wasn't Microsoft's refusal to provide the source code as much as it was Microsoft's restrictive licensing terms that eventually soured Sendo on Redmond. "It's nothing to do with the actual Microsoft platform itself," she said. "But from all I can gather, Microsoft didn't allow them to do deep customization. Apparently the licensing terms that Microsoft imposes restricts that."

But Microsoft's Suwanjindar said he didn't believe that as well. He wrote: "Sendo has been testing our software for some time. If this were such a big issue for them, dont you think they would have noticed before? Pulling their product when they were so close to crossing the finish line is baffling." He also said that given other deals Microsoft has in the works, Sendo's turnaround amounted to only a "speed bump."

The market "is in early days," he wrote. "It's anybody's game and we're in this for the long haul."

Von Tetzchner is also in the cellphone business for the long haul, as is Symbian. Von Tetzchner doesn't believe that Symbian has to become the dominant operating system in cellphones for his firm to find success, but he does think Microsoft, which would ship its browser with its OS, should not become dominant. There's no reason anyone has to own the market, he says -- lots of different companies, Microsoft and Symbian among them, could share the wealth. "With any product in the world, you have choice," he says. "All these cellphones here are from different makers. Why should software be an all-or-nothing market?"

But does Microsoft want an all-or-nothing market? In many of its public comments on smart phones, the company has said that it believes deeply in customization. At the same time, however, it has heavily pushed the Windows brand on all of its Pocket devices -- you can already see this in the uniform look and feel across all of its PocketPC PDAs and in the marketing for those devices. Its competitors, and its potential allies, in these mobile markets don't know what to make of this, which is understandable: "Nokia is one of the strongest brands in the world," von Tetzchner says, summing up the phone makers' worries regarding Windows. "Why would they want Microsoft on their devices?"

So far, only in Japan has the "mobile Internet" done well. Even though that country, with its relatively low desktop-PC ownership, is something of a special circumstance, the cellphone industry is eager to replicate the Japanese market for Internet cellphones around the world -- and if such phones do become the standard in cellphones, handset firms like Nokia would hate for Windows to be the thing customers look for when they go to make a purchase..

In May, during a speech at Microsoft's Silicon Valley campus in Mountain View, Calif., Juha Christensen, Microsoft's corporate vice president of mobility, seemed to try to allay the fears of phone makers. Microsoft, he said, is very "interested" in the diversity of hardware in the phone market.

"You know, if you walk into a mobile-phone store today you'll see anywhere between a hundred and two hundred different phones on the shelf," Christensen said. "There is something for everyone -- small, round, light, metal case, whatever. And we see this very much being the case in these types of [smart] devices as well."

Christensen, who co-founded Symbian before he went to Microsoft, also acknowledged that the phone business is "a very fashion-driven market." On a recent trip to China, he said, he saw people who have "started putting diamonds on the front plates of phones, and some people even use them when they propose to their girlfriend to marry them -- they give her a phone with a diamond on it as opposed to a ring, so this kind of can show you how far it can go if it goes to the extreme here."

And then Christensen added something that would seem very un-Microsoftian: "As a matter of fact a prediction that I often make is that three years from now you will not find two mobile devices on the planet that are configured the same way. It's not just the hardware that's very, very personal; it's the skin that you put on the front page. It's the applications you have on it. It's the services you subscribe to. It's your ring tone. Every device will be different and we'll see there are so many permutations out there that very, very easily every device on the planet is going to be differentiated and is going to look different."

In the world of desktop computers, one of the historic points of contention between Microsoft and computer makers has been over the manufacturers' freedom to alter copies of Windows they ship on their machines. Manufacturers have fought with Microsoft over every conceivable thing that goes into the computers they sell -- over what applications and competing OSes they can ship with the machines, over the icons they add to the desktop, over the Internet service providers that can be added to what Microsoft calls Windows' "out-of-box experience." So it's surprising to hear a Microsoft executive saying that he envisions no such fights in the world of mobile hardware -- and it's hard to believe.

"We tell people in this industry, 'Go to computer makers and ask them how happy they are to deal with Microsoft,'" says Opera's von Tetzchner. Microsoft may be telling the phone carriers that it will be open to customization, but they need only look at its record to judge it, he adds. "And if they do look at the record, they would have to be rather stupid to get with Microsoft."

It's not at all clear what Microsoft means when it says it's open to customization. Will it require phone makers to keep the Windows look and feel on their phones? Will it require that Microsoft smart phones be sold and marketed as "Windows powered"?

When asked about phone makers' freedom to alter Windows in smart phones, Microsoft's Suwanjindar pointed to the Orange SPV phone as "a great example of how an operator can brand the entire experience. In this case Orange has branded the home screen, the dialer, many of the applications as well as the actual handset."

He's right about that -- but the phone is still unmistakably a Windows phone. You just need to look at a couple of screenshots for proof. There are the familiar Windows icons and Windows software. When you need to chat with someone, you load up MSN Messenger. When the phone is busy, the Windows hourglass icon pops up.

In fact, familiarity is one of Microsoft's key selling points. "If you have used Microsoft Windows before, then you will be very familiar with the new Smartphone 2002," reads the ad copy on Microsoft's smart-phone page. "You will recognize the interface and programs, and the Smartphone extends the reach of the PC experience by allowing you to access the same applications, information and services and use the same profiles and login accounts you have set up on your home or work PC."

And familiarity is not a bad thing, says Suwanjindar. "We are hearing from customers (end users and operators) that the Windows brand is very valuable," he wrote. Consumers are "comfortable with the Windows technology, thus customers can easily adapt to the Smartphone technology. That is an advantage. As far as having phones that look similar based on the same OS, all our partners have room to differentiate and add value to their respective products."

Is it so bad -- from a phone maker's point of view, as well as from a phone buyer's -- to have a Windows phone? Like much else in the phone business, that seems to be more of a marketing question than a technology question. "Quite frankly, all these phones do the same sort of the thing, don't they?" Zoller, of Ovum, says. "The actual basic underpinnings are similar -- so if you're a phone maker, one way to make yourself different is branding, and Symbian's model offers more freedom for that."

Zoller's point is crucial. She isn't saying that Microsoft's phones are any less customizable, from a user's perspective, than any other company's phones. Microsoft says that its operating system will work on a number of different phones from a number of different manufacturers; and it says that users will be able to change the aesthetics of the OS to suit their mood, as you can do in Windows desktops; and it says that developers will be free to create programs for the system and that users can run any program they like. And the company may be right on all of those points, and yet still not be customizable enough -- or at least customizable in the way that would matter most to the big phone makers: Letting them replace the Windows logo with logos of their own.

Consequently, what could happen in the phone business, analysts say, is that small phone makers that don't have a strong brand will decide that hitching on to Microsoft is the best thing for them. The big companies will use Symbian's system, which allows them the freedom to build an interface more in tune with their brand. And we could end up with a split market, with Microsoft likely owning the smaller share.

Getting the smaller share of a split market is probably not what Microsoft was looking for when it got into the phone business, so -- unless it drops out of the business completely, which is unlikely -- it's probably not going to take such an outcome well. And the people who compete with Microsoft, like Opera's von Tetzchner, know that the company, by virtue of its deep pockets, can always pull something out of a hat when its fortunes dim. If Microsoft manages to coerce one of the large cellphone companies to use its system, for example, it could become a formidable competitor.

"No," von Tetzchner says pragmatically, "I don't believe that the best technology always wins."

But at the same time, he says, there's something about Microsoft's power that he kind of enjoys: It helps in sales meetings. "We're the kind of company that people look at and say, 'You're competing with Microsoft and you're surviving. You must be doing something right.' People are afraid of Microsoft. And in our dealings, we've found that as long as we provide a solution that's at least as good as Microsoft's, people are OK with it."

In other words, one of Opera's main selling points is that it's not Microsoft. "Usually we don't even have to remind them of that," von Tetzchner says.

By Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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