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Microsoft Battles Google, Nokia For Cell-Phone Supremacy


But finds increasing competition from usual suspects.


Microsoft (MSFT) plans to continue charging makers of cellular phones an estimated $8 to $15 licensing fee for use of its Windows Mobile operating system.

The software giant is under increasing pressure from Apple's (AAPL) iPhone, Google (GOOG) G1 and Nokia (NOK), which recently purchased Symbian and plans to develop an open source, or royalty-free, software package and make it available to other makers of smartphones.

"We are doing well," Steve Ballmer, Microsoft's chief executive officer, told Reuters. "We believe in the value of what we are doing."

He questioned the open source software model pursued by competitors in the smartphone sector.

"It's interesting to ask: Why would Google or Nokia, Google in particular, invest a lot of money and try to do a really good job if they make no money? I think most operators and telecom companies are skeptical about Google."

Maybe so, but Google apparently plans to make money by integrating services such as Gmail and Google Maps in its smartphone and then selling ads to companies seeking to reach a targeted audience. It's a continuation of Google's successful business model of providing free search and email surrounded by advertising.

Nokia, maker of about 40% of the handsets sold worldwide, counter-punched this summer with the acquisition of Symbian, the developer of software used to power many of the world's smartphones.

Nokia also competes with Research in Motion (RIMM) which recently announced it planned to enter the retail market with a clamshell flip version of its BlackBerry Pearl smartphone.

Microsoft continues to invest heavily in Windows Mobile and several cell phone makers, including HTC and Sony (SNE), have selected it rather than Symbian. This backs Nokia into an odd position: The only fully up-and-running competing non-proprietary operating system for mobile phones is the Big Foot of the Pacific Northwest, Microsoft.

But that's likely to change. Google's Android is in early stages of development in cooperation with the Open Handset Alliance, a group of about 30 companies including Motorola (MOT), Qualcomm (QCOM), HTC and T-Mobile.

Nokia plans to develop Symbian as an "open source" system that other manufacturers will be free to use in their phones without paying a license fee. Nokia hopes phone makers will use its software rather than Windows.

Nokia's gambit: Third-party developers will create a range of applications, including games, using the Symbian software much like some are doing with Android. If so, Nokia hopes its phones, and phones made by competitors using Symbian, will be more attractive to greater numbers of users and outsell the competition. It's a reasonable bet, but so far Nokia has failed to develop a significant customer base in the US.

Some users have complained that high-end devices using Symbian run slowly. If so, that suggests the software needs to muscle up before tangling with Microsoft, Google and Apple.

Such competitive development of new operating software and third-party applications is good news for cell phone users. File this under: The things companies do to avoid paying tribute to Microsoft.

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