Microsoft kills Zune phone talk

FAM Microsoft has killed any lingering hopes, fears, dreams, suspicions or conspiracy theories involving a Zune challenge to Apple's iPhone.

At the same time, Microsoft executives committed to improvements in Windows Mobile, saying the software's been too square for consumers.

But the company won’t commit to the possibility of tailoring its Windows operating system to Intel x86 on mobile.

Chief executive Steve Ballmer and entertainment and devices business chief Robbie Bach pledged Microsoft would follow a software-only strategy during Microsoft's Financial Analyst Meeting (FAM) on Thursday. They said Microsoft would work more closely with handset makers instead.

Ballmer said he believed in the need for Microsoft to be a "for profit, software-only player" in the mobile phone market.

Bach - whose business seems to have not heard of the iPhone's success - backed this up, saying Microsoft will do a better job on integration of its software with the underlying hardware.

"You will see dramatic improvements between the integration on software and hardware," he said.

Translated: no Microsoft-style iPhone. But there will be a continuation and improvement in Microsoft's established model forged in PCs and servers of working with hardware providers. The prospect of a Microsoft phone, based on the Zune, has been a fertile source for rumors and half-reports.

Bach continued that Microsoft could - and would - improve the capabilities in Windows Mobile for consumers.

"If I have a critique of our phones it is that our experience is very good in the business case," Bach said, pointing to things like integration with Outlook and Exchange. "We will change with 6.5," he promised, telling financial analysts this would provide a "very rich browsing experience with the ability to get to more sites than you can get on an iPhone".

To help get there, he claimed Microsoft had "significantly invested" in "quality talent" during the last 12 months, with people from Microsoft's Exchange, Windows, and mouse and keyboard businesses recruited to work on mobile inside the entertainment and devices division.

Apart from Windows Mobile 6.5, there were no more specifics on what Microsoft had planned to take on Apple, RIM, or Palm in smart phones.

Microsoft hosts FAM after the close of its fiscal year, and the company has seen a decline in market share despite an increase in the number of phones sold that run Windows. Ballmer blamed execution and slow pace of development.

Microsoft’s problems in mobile and devices have certainly been of its own making. Since stepping up to challenge the Palm Pilot with Windows CE around 10 years ago, Microsoft has flipped between evangelizing the Windows CE and Windows Mobile brands. This has created confusion for everyone concerned.

But now, things are set to get even more complicated. Intel is working on low-powered x86 for mobile, which raises the prospect of full-fledged Windows also making it on to mobile phones or devices like readers.

Bach failed to provide any insight into what Microsoft might do with x86 on mobile.

Asked whether x86 is a "significant event" in the mobile roadmap, Bach said: "We have a pretty good handle on the x86 environment and we can make a business decision based on volume and what our operator customers are looking for."

Chief research and strategy officer Craig Mundie, on stage with Bach, suggested the work putting Windows on x86 mobile would be relatively easy from a technology stand point. He said Microsoft knows x86 well and has an easy time supporting x86 through its work on PCs and servers.

"Clearly, adapting that to the environment that we have in the embedded and the phone business would take some work. But it is not a monumental amount of work," Mundie said. ®