Microsoft's 'Pink' Smartphone Project In Danger

In-house development delays are putting a stealth Microsoft-Verizon smartphone project in danger of collapse, has learned.

Microsoft and Verizon Wireless have reportedly been working on a Microsoft-branded touch-screen smartphone that Verizon could launch on its network as early as next year. The smartphone, code-named Pink, would consist of Microsoft software running on a third-party device, according to sources familiar with the project. However, Microsoft has encountered major setbacks that have affected its schedule for bringing Pink to market, sources said.

The delays have many wondering if the mobile industry is moving on without Windows Mobile. Motorola CEO Sanjay Jha last month revealed plans to launch several smartphones based on Google's Android platform later this year, but didn't even mention Windows Mobile, despite earlier assertions that Motorola would bring Windows Mobile smartphones to market this year.

Pink was originally intended to tap into the underlying technologies of Windows Mobile 7, which was expected to be ready this year. But repeated Windows Mobile 7 delays have forced Pink developers to use other Microsoft technologies that require more work to implement, according to sources close to the matter.

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Representatives from Verizon declined to comment for this story, and a Microsoft spokesperson offered the following statement via e-mail: "Microsoft's strategy has not changed; it is and has always been to provide a software platform for the industry. We work closely with many mobile operators and device makers around the world because customers want different experiences on a variety of phones."

The Pink delays illustrate how the slow pace of Windows Mobile development is hurting Microsoft's ability to compete in the smartphone market. iPhone sales recently propelled Apple to its best non-holiday season quarter in company history. RIM's BlackBerry Curve eclipsed iPhone sales during the first quarter, according to The NPD Group. And Google's Linux-based Android is attracting growing attention from device makers looking to shave costs.

Meanwhile, Microsoft is struggling to revamp Windows Mobile and keep pace with hard-charging competitors. According to Gartner, Windows Mobile market share stood at 12.4 percent at the beginning of the year, compared to 10.7 percent for Mac OS X, 19.5 percent for RIM and 47.1 percent for Symbian.

Particularly galling for Microsoft is the fact that RIM has successfully moved from its business roots into the consumer space, which is exactly what Microsoft is trying to do with Windows Mobile. Microsoft says Windows Mobile 7 will offer a user experience commensurate with that of the highest-end smartphones on the market, but hasn't said much about what features it'll include.

Next: The Impact Of Windows Mobile Delays

Microsoft hasn't set a timetable for Windows Mobile 7, but had been expected to launch it sometime in 2009. However, in February, Motorola's Jha said his company expected Windows Mobile 7 to arrive in 2010. And according to Microsoft watchers, Windows Mobile 7 devices aren't expected to arrive until April 2010 at the earliest. Microsoft has yet to release Windows Mobile 6.5, despite expectations that it would do so in February at the World Mobile Congress in Barcelona, Spain.

Microsoft CEO Steve Ballmer has acknowledged that the company needs to speed up Windows Mobile development. Microsoft earlier this year underwent an across-the-board reorganization of its mobile communications business in an attempt to jump start Windows Mobile development. But with new executives still settling into key management positions, that move could result in further Windows Mobile 7 delays, sources said.

One Microsoft channel partner says it's a scenario that has played out many times in the past in areas where the company trails the competition. "There's a definite pattern at Microsoft where the company works hard to compete and then takes its eye off the ball and has to restart," said the source, who requested anonymity. "It's seriously going to take Microsoft a long time to catch up in the mobile market."

If Pink continues to run into delays, it's not out of the question that Verizon could decide to back out of its partnership with Microsoft and choose a faster-moving partner. That would be a major blow to Microsoft's efforts to showcase the superiority of its licensing-based strategy to Apple's proprietary approach to the iPhone.

A Microsoft job posting in March offered some insight into what Microsoft hopes to achieve with Windows Mobile 7. "We aren't just building a me-too iPhone or RIM competitor; we're changing the way customers use and experience their device," the job posting read.

With Pink, "Microsoft wants to put a stake in the ground around what they think the phone of the future is going to look like; otherwise they'll be accused of continually trying to recapitulate the iPhone," said Michael Cherry, an analyst with Directions On Microsoft, a Kirkland, Wash.-based research firm.

That's an ambitious goal in the red-hot mobile industry. But Microsoft, which in 2008 missed its Windows Mobile sales target by 2 million licenses, needs to start hitting its Windows Mobile deadlines before entertaining notions of redefining the mobile industry.