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Microsoft adds RIM to its anti-Google axis

Both RIM and MS need to cut cords with their mobile OS and soar into cloud

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When Microsoft first burst on the mobile scene with the original Windows Mobile, its strategy was to work around the Symbian brigade by getting close to operators, via mainly white label phone-makers. Hence the rise and rise of HTC, on the back of huge market share in an OS that interested very few rivals, plus the special attentions of its patron. With WP7, the stakes are higher and Microsoft has one final chance to prove itself.

HTC remains the Windows leader but is seeing Android as a bigger growth driver, and the future influence of operator/ODM brands is questionable.

So the old strategies will not work, but as Google has learned from the Microsoft/HTC experience, a couple of co-dependent adopted children are a good way to seed a platform. This time around, though, an obscure Taiwanese supplier won't cut it – instead Microsoft is courting the giants. The Android lovers like HTC, Samsung and LG may be supporting WP7, but the inner circle consists of those with a reason to hate the Google OS – first the Nokia alliance, now a growing closeness to RIM.

RIM and Microsoft ally on web services

With its BlackBerry World conference overshadowed by a profit warning and doubts over the prospects for its flagship Bold and PlayBook lines, RIM looked like the weak pack member, ripe to be picked off by Microsoft as a vehicle to boost WP7's reach and credibility – and perhaps more importantly, to bolster Microsoft's platform for mobile web and cloud services. After all, the Windows giant is more than a device software player. Failure in the smartphone/tablet sector would be humiliating, but arguably not bad for the future strategy of the firm. Microsoft needs to cut the umbilical cord with Windows and go multi-OS, and the stronger its cloud server offering and its all-screen web services, the more irrelevant it can make the client OS.

So the Nokia deal is as much about getting the firm's crown jewel – Navteq mapping and location – into Microsoft's web arsenal as about giving WP7 a key cheerleader. And the new RIM alliance, announced by Microsoft CEO Steve Ballmer in a surprise appearance at BlackBerry World, is not about WP7 at all (at least initially) but about tying the host of loyal BlackBerry users into the Microsoft cloud, and its web offerings.

The first step is to make Microsoft Bing the default search engine for RIM products, though Ballmer's tone made it clear there would be more to come. When he said Microsoft planned to "invest uniquely" in BlackBerry services, it was a virtually uncoded signal that the partnership would develop rapidly, leading to joint cloud services and even, perhaps, RIM supporting WP7 as an overlay in some scenarios, as it will support Android. It also revived a favorite old rumour, that Microsoft could actually buy RIM – especially if further profit warnings dent its usually untouchable stock – acquiring the BlackBerry base and software for its mobile cloud, in a larger version of its purchase of Danger for the Sidekick user interface and social apps.

For now, the goal is to strengthen Bing as the spearhead of Microsoft's overall web attack on Google. The deal will see Bing search and maps (which will soon incorporate Nokia Navteq) into BlackBerry phones at operating system level. The Microsoft CEO added that the new offerings would appear by the end of this year and said: "This goes way beyond a search box."

BlackBerry has a large and loyal base now, especially in the enterprise, and Microsoft clearly wants to tap into that, regardless of its own WP7 push. It said RIM technologies would be integrated deeply into Microsoft cloud offerings, which are increasingly focusing on clients running multiple OSs rather than clinging to a Windows-only past. In February, RIM announced an alliance with Microsoft to tap into corporate clients' increasing use of cloud data services, and from the second half of 2011, cloud services will be an important part of WP7 enhancements, with a Windows Live SkyDrive promised for sharing and storing Office and other documents.

Bing is one of the rare areas where Microsoft has scored significant mobile points against Google, though the latter still boasts a 97 per cent share of the US search revenue market. Bing is already the default search engine for some Verizon Wireless phones, including the Android Samsung Fascinate and several BlackBerry models. However, it has miniscule market share so far against Google and needs more creative partnerships to generate meaningful revenues. In Microsoft's Q1 results, the Online Services Division – which houses the Bing search engine and MSN – was heavily disappointing, despite a 14 per cent rise in revenue, with an increased loss of $726m. This highlighted the desperate need for Microsoft to up its game in web/cloud services, an area where there is – as Amazon has already shown – a genuine opportunity to defeat Apple, which has been slow to move.

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