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Microsoft's New Mobile OS Targets RIM, Not Apple

Microsoft has been in a world of hurt over Windows Mobile. It wasn't until last fall that version 3.5 came out, and that still required ALBs -- annoying little buttons -- rather than implementing a complete touch user interface, even though Microsoft has been working on such UIs far longer than Apple (AAPL). Yesterday it finally announced what it is calling Windows Phone 7, with devices shipping ... by Christmas. Once again Microsoft trails behind the iPhone. Only, I don't think that CEO Steve Ballmer is trying to stare down Apple. I think he's really interested in Research in Motion (RIMM) and the Blackberry.

Microsoft's new approach sounds as though it began with its Zune media player software and somehow crossed that with Windows Mobile. This isn't too surprising. Last August I speculated about Zune being a platform for a phone because, well, it was so completely obvious as a potential direction. Last month I said that Zune was the company's only mobile hope. The attractiveness of the interface was just too strong, and Microsoft needed to do something completely different from business as usual. Amazingly, it actually did this time.

Larry Dignan at ZDNet asks whether Windows Phone 7 is too little, too late. And it's a good question to ask. Microsoft has been losing market share almost faster than a modern investment banker loses credibility. But you have to ask the question in context: Whom is Microsoft targeting?

Many assume it's Apple and the iPhone, but I'm not convinced. Yes, there are many people buying iPhones, athough as I've noted in the past, Blackberrys outsell Apples in units. Furthermore, they focus on different markets. RIM eyes the enterprise. As Computerworld has noted, Apple is uninterested in actively pursuing that market.

Enterprise computing is the source of Microsoft's strength. Not only does it account for beaucoup sales, but, just as Apple has successfully used education sales in the past, getting products into enterprises gets many people used to using them in other environments.

Microsoft moves at enterprise speed: carefully and deliberately. Although at times it's shown a seeming interest in competing head-to-head with Apple, the companies live in different and largely non-intersecting worlds. Microsoft can't maintain that pace of change, nor would Apple's rhythm serve its primary market focus. (Meanwhile, as BNET's Brent Schlender reported, Bill Gates has also been dismissive of Apple's iPad.)

The complexity and scale of the enterprise -- factors that are off-putting to Apple -- are the core of Microsoft's business. Now the question becomes not whether Microsoft is late in general, but whether combining a Zune interface sensibility with an enterprise focus might put the company back into one segment of the handheld market that could open a door for the rest -- particularly with social network and Xbox Live gaming integration.

Can it succeed? Think of the competition. Neither Android nor iPhone OS is optimized for the enterprise. Intel (INTC) and Nokia (NOK) are pairing up on a new operating system called MeeGo (an aside -- that has to be one of the goofiest names I've heard yet!) that will work on ARM or Atom chips. But what other phone makers will want to support that big a competitor? Palm (PALM) is showing potential signs of financial trouble" and its sales are disappointing analysts. Symbian? Now an open source OS, it's fallen behind competitors in terms of interfaces and capabilities.

From the enterprise view, it looks like RIM and Microsoft are the ones to watch, which shrinks the competitive field down enormously. Given the positive initial impressions of Windows Phone 7, Microsoft could confound long-time critics by locking down a niche market that would let it expand in many other directions -- if RIM doesn't quickly release a significant next generation upgrade.

Image courtesy of Microsoft.