February 14, 2006

Microsoft CEO Sees Smartphones at $100 in 1-2 Years

BARCELONA -- Microsoft Chief Executive Steve Ballmer expects smartphones powered by the company's Windows Mobile software to sell for $100 within one or two years, which would create a huge market.

"We will get smartphones at consumer style prices," Ballmer said in an interview on Tuesday at the 3GSM wireless trade show.

"I think it will take a year or two before we get to $100 type offerings (of Windows Mobile devices). I may be wrong, but not by much," he told Reuters.

Today's Windows Mobile smartphones sell for between $200 and $300, before operator subsidies.

"The situation today is that a very small percentage of the market is smartphones. Our relevant share is not our share of the overall market, but of the smartphone market. And the smartphone will be a very large share of the total market."

With its Windows Mobile software, Microsoft competes with British software maker Symbian, owned by the world's top handset producers.

Together, the two companies sold software that powered most of the roughly 50 million smartphones that were shipped last year, with Symbian clearly outpacing Windows Mobile because of the push from Nokia, its largest shareholder and also the world's top handset maker with a 34 percent market share.

Nokia, which Ballmer admits is not likely to become a Windows Mobile customer, has about 50 percent of the global market for smartphones.

Smartphones can load and run software applications like email, enterprise planning, mobile TV, and games much like a personal computer.


Symbian announced price cuts for its software of up to 50 percent last week, pricing a single operating system for a phone as low as $2.50. Ballmer declined to say if he would match he price cut, but said: "We're going to do everything that is needed to invest in this market and expand in this market."

Ballmer said the total mobile phone market was even more interesting than he imagined when his company decided to enter the market.

"I'm not sure what I would have said if you told me five years ago that one billion mobile phones would be sold in a year, yet that's going to be the case pretty soon."

Last year alone, 810 million mobile phones were sold around the world, 20 percent more than the year before.

"It's huge, and we've only scratched the surface. The market is still mostly voice-only devices."

"We want to give people access to information wherever and whenever they want it. Oftentimes that's on something that fits in their pockets."

When Microsoft announced its plans to get into the mobile phone software market five years ago, it got a lukewarm welcome because mobile phone vendors and carriers feared Microsoft would aim to dominate the market in the way it dominates the personal computer operating software sector.

"I don't say we were welcome when we started," Ballmer said.

But he feels the situation has changed as operators turn to Microsoft as another supplier of software alongside Symbian.

Even with the device makers, the ones that put Symbian in the saddle, Microsoft has design wins. It has won deals with top vendors like Samsung Electronics, LG Electronics and Motorola, which have launched Windows Mobile products or will do so later this year.

"I feel we've broken through. I'm not expecting a breakthrough with Nokia, but even to them we supply some technology in handsets."


Asked what was next on his radar as the company has expanded in consumer electronics and wireless communications software, Ballmer said Internet services were the sweetspot where a lot of these sectors came together.

Although Microsoft is actively pursuing its own Internet services, with email and messaging, online games and searching, Ballmer said powerful software on a device would be important.

Companies like Google would not be able to offer the same quality of service in all these areas through a web browser.

"The user will demand intelligence in a pocket, not just in the data service. We all agree on that. Nokia has Symbian/Series 60, Motorola has Linux/Java, Research In Motionhas BlackBerry."

Regarding mobile email, Ballmer dismissed claims from RIM CEO Jim Balsillie on Monday that RIM has a more versatile wireless email service, helping to push more kinds of email to a wider range of devices from more vendors.

"There are not a whole bunch of devices that support BlackBerry. There are many more devices with Windows Mobile than with RIM stuff.

"And frankly, the RIM devices are not the strength of the RIM experience," said Ballmer, adding that a company like Nokia has more experience to build attractive mobile devices.

RIM is the mobile email leader with 4.5 million subscribers, but Microsoft and Nokia launched competing offerings in recent months to address the hundreds of millions of email users that do not yet have mobile access.

Microsoft was ready to open up its Windows Mobile devices to other email systems, he said. "We'll support other environments. Hotmail, Yahoo Mail. Or if IBM wants to write a client to write to Lotus Notes, they can do that."