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Microsoft's Ballmer says big pPhone mergers unlikely

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Microsoft Corp. (Nasdaq: MSFT) Chief Executive Officer Steve Ballmer said he doesn’t expect acquisitions and mergers among large mobile-phone suppliers and that Microsoft is “doing well” with the partnerships it has.

“I don’t see the big boys in this market as very ripe for mergers and acquisitions,” Ballmer said in an interview in Barcelona, Spain, Monday. “One day, maybe somebody in some place with a lot of money wakes up and changes it, but that’s not me and that’s not today.”

Microsoft values its existing partnerships, Ballmer said, when asked whether it would make sense for the world’s biggest software company to buy a maker of mobile devices, such as Research In Motion Ltd. (Nasdaq: RIMM) or Nokia Oyj. Microsoft showed the latest version of its Windows mobile-phone operating system, adding video games and music features to stem market-share losses against Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOG).

Unlike Apple and Google, Microsoft doesn’t plan to introduce its own mobile phone, Andy Lees, senior vice president at Microsoft’s mobile business, said at a meeting with analysts in Barcelona. Companies including Samsung Electronics Co., HTC Corp. and LG Electronics Inc. will make handsets running the Windows Phone 7 Series software, and such devices will be available for the year-end holidays.

The updated operating system has a new design and it connects with Redmond, Washington-based Microsoft’s Xbox Live online game service and Zune music service.

‘Next level’

Microsoft’s Windows dropped to 7.9 percent market share in worldwide smartphone software in the fourth quarter, from 12.5 percent a year earlier, while Apple and Google had gains, according to ABI Research. The mobile-phone market is changing quickly, so Microsoft has a chance to turn things around, said Michael Gartenberg, an analyst at Los Angeles-based research firm Interpret LLC.

“The momentum was definitely going against them last year, but last year just doesn’t matter because things are moving so fast,” he said. “They need to come up with a compelling story that appeals to both business and consumer users. They need to be able to show they are taking this thing to the next level -- that this is not just a iPhone clone.”

Apple’s iPhone rose to a 16.6 percent market share in the fourth quarter from 10.8 percent the previous year, according to Oyster Bay, New York-based ABI. Google’s Android operating system climbed to 8.5 percent from 1.7 percent.

“Apple has done a nice job,” Ballmer said today. “But the smartphones today all kind of look the same. Everybody went ahead and kind of copied the user-interface approach of Apple and people will say Windows Phone 7 Series is different, the way we integrated Bing, Office, Xbox and Zune.”

Bing, Zune

Windows Phone 7 will work on touch-screen phones, and the software’s design resembles that of Microsoft’s latest Zune HD music and video player. The program includes access to Microsoft’s Office applications and lets users update their social-network sites and share photos.

Microsoft said all Windows Phone 7 devices will have a hardware button that opens Microsoft’s Bing search engine, which is trying to gain ground on market leader Google.

The phone connects with the Xbox Live online service so users can play games and see gamers’ profiles and achievements. A connection with the Zune service lets customers play content stored on their personal computers, as well as music online. The feature also includes FM radio.

Comeback chance

Microsoft may regain momentum with the new software, said Bill Predmore, president of Seattle-based digital marketing agency POP, which helps clients develop mobile applications.

“It’s far too early to count Microsoft out,” Predmore said. Windows Phone 7 will probably be a program that people want to build apps for, particularly in the business area, he said.

“Windows Mobile was a serious contender a few years ago,” said Predmore, who counts both Microsoft and Google among his firm’s clients. “They did lose momentum, but they are good with developers and know how to build good software. Microsoft absolutely has a chance to redeem themselves.”

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