Microsoft and Telefon AB L.M. Ericsson announced a partnership to develop wireless Internet applications, sending shares of Ericsson sharply higher in Stockholm trading.
The deal is a big victory for Microsoft, which had sat on the sidelines as the world's biggest wireless-phone makers -- including Ericsson and Nokia Oy -- had formed a massive venture called Symbian based on a rival technology.
Ericsson said the Microsoft deal won't affect Symbian, but investors weren't convinced. Shares of British handheld-computer maker Psion (quote: PON), whose software is at core of the Symbian venture, plunged as much as 40 percent in London trading Tuesday.
Shares of Ericsson, for their part, soared on the news, rising $6.3125, or 11 percent, to $65 in early trading Wednesday on the Nasdaq Stock Market. In late trading in London, Psion shares were down were down 560.5 pence, or 19 percent, at 2,445p.
"This doesn't cut out Symbian, or materially damage it... but it shows Microsoft will not go away," said Andrew Bryant, an analyst with BancBoston Robertson Stephens. "Stock markets had started to bet that Symbian had won over Microsoft. This announcement shows it's too early for that."
Microsoft and Ericsson plan to form a joint company to market and deliver mobile email solutions for network operators. Ericsson, a big Swedish maker of mobile phones and other telecommunications gear, will hold a majority share in the new company. Ericsson will provide its wireless application protocol, or WAP, systems to Microsoft and will adopt the software giant's Mobile Explorer for feature phones. This will give operators, developers and consumers more choice and functionality in developing and accessing wireless services, the companies said.
This microbrowser will display both HTML -- the language of traditional Web sites -- and WAP 1.1-compliant content, thus eliminating the need for operators and developers to choose between technologies, the companies said.
The joint company, which will be based in Stockholm, will focus on deploying solutions that utilise Microsoft Windows and server applications and Ericsson's mobile Internet technologies.
In a separate release, Ericsson said the agreement with Microsoft doesn't affect its involvement in the Symbian venture or projects based on Psion's Epoc operating system.
Symbian is a joint venture between Psion and mobile phone giants Motorola, Nokia, Ericsson and Matsushita Communication Industrial. Psion currently holds 28.1 percent of Symbian. Ericsson, Nokia and Motorola have 21 percent each, and Matsushita has 8.8 percent. "Bringing together Microsoft's strengths in Internet and enterprise messaging software and our leadership as an open communications solutions provider of mobile voice and data will offer tremendous ease of use for consumers all over the world," said Ericsson President Kurt Hellstroem.
Microsoft had formally introduced the Microsoft Mobile Explorer software platform earlier in the day. The wireless applications and services platform provides wireless data services, such as secure corporate data access, email, Internet access and electronic-commerce.
Microsoft said British Telecommunications (quote: BT) is using Mobile Explorer in the UK and Norway for corporate customer trials.
Korea Telecom's Freetel unit and Deutsche Telekom's MobilNet unit are evaluating the software for current and future networks. Microsoft plans to begin delivering Mobile Explorer for feature phones in the first quarter.
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