Ericsson and Microsoft Clear the Air

Sally Khudairi (
Thu, 9 Dec 1999 23:42:07 -0500

Computergram International
Section: 01. Top Stories

Microsoft Corp and LM Ericsson Telefon AB yesterday formally discussed the
mobile internet applications joint-venture and strategic partnership whose
premature announcement on Wednesday created chaos on stock exchanges in
London and Stockholm. The two partners offered little in the way of new
factual information, but senior executives from both companies did much to
convince their audience that Microsoft is no longer in danger of being
isolated by the mobile internet movement.

At a press briefing in Stockholm, Ericsson's president Kurt Hellstrom, and
Microsoft president Steve Ballmer, confirmed that the two companies have
agreed to create a joint-venture company that will develop applications for
mobile devices. The company, as yet unnamed, will be headquartered in
Sweden's "Mobile Valley" near Stockhlom. It will be majority held by
Ericsson, said Hellstrom, although the proportion of shares each partner
will hold is yet to be decided. Staff from both companies, although largely
from Ericsson, will be seconded to the new venture, and its first product is
expected to emerge early next year. That product said Hellstrom "will be
wireless email. The key, the killer application in making the mobile
internet a reality."

This will be only the first of series of applications geared to the needs of
mobile carriers and device users. Ballmer said the companies will seek to
create a standard by bringing together existing standard technologies in
practical formats. To do this, the venture will focus on three key areas, he

The first area will be the emerging standards for harmonized third
generation (3G) mobile networks such as GPRS (the general packet radio
system overlay for GSM). The second effort will be to "create a very
powerful client protocol" which will combine the strengths of WAP (the
wireless application protocol) and XML (Extensible markup language). The
third area of development will focus on Bluetooth, the wireless device
interconnect standard that Ericsson has been instrumental in creating, and
which Microsoft only last week agreed to endorse when it took a place in the
standards consortium's Bluetooth Promotion group.

As a public relations exercise, yesterday's briefing served to reinforce the
message that Microsoft has now fully emerged from the shadows of the mobile
internet scene and negotiated itself a place alongside the movers and shakes
in a market sector that will seek to sell products to an estimated user base
of 450 million by 2004. As a member of Bluetooth's chief policy engine,
Microsoft now stands to penetrate potentially the most important
connectivity standard for next generation domestic and business standards
with its Universal Plug and Play technology. While as Ericsson's partner in
its new venture, it will now work hand in hand with a leading WAP proponent
to flesh that protocol out with XML features.

More immediately, when Ericsson, the world's third largest mobile handset
maker, ships its next range of feature phones in 2000, Microsoft's newly
announced dual-mode HTML and WAP-based Mobile Explorer for feature phones
microbrowser will be onboard. And while yesterday Ericsson executives stuck
religiously to the line that Micro Browser for smartphones will not feature
on the company's more advanced PDA-like phones, and with it Microsoft
Windows CE, the company could still not entirely shake the suspicion that
its new alliance has not loosened its commitment to Symbian.

That company, which Ericsson co-holds with Nokia, Motorola, Matsushita, and
the UK PDA maker, Psion, has suffered a blow to its market credibility from
yesterday's announcement. Its EPOC handheld operating system has already
been hit by Nokia's decision to endorse 3Com's PalmOS as an application
platform for future handheld devices, and now a second major shareholder
appears to be willing to play with a company which is, by any measure, a
deadly competitor for EPOC.

Pressed on the strength of Ericsson's commitment to EPOC the company's
senior VP for marketing and strategic business, Torbjorn Nilsson, said
"today there exists only one operating system in the market for smartphones,
and that's EPOC. So we have to use that one." What then will Ericsson do
when Microsoft unveils its much-vaunted new versions of Windows CE in the