Internet Muscles In on Cell Phone Turf

Having emerged as a popular technology for making phone calls—often free of charge—via one's PC, voice over Internet protocol (VoIP) is set to stake its claim on the mobile market. Mobile VoIP may not replace cell phones in the immediate future, but it will give callers the ability to bypass cellular networks wherever they have access to a Wi-Fi network.

Luxembourg-based Skype, Ltd., a division of online auctioneer eBay, has been pushing over the past year to deliver more of its VoIP services to mobile callers through a partnership with wireless network equipment maker NETGEAR, Inc. A year ago, the two companies teamed up to offer the Skype Wi-Fi mobile phone, which lets callers make free Internet calls to anyone who also has a Skype account and access to a Wi-Fi wireless Internet connection. The phone does not require a cellular network but it must be within range of a Wi-Fi access point to operate.

Skype is now reportedly planning to expand mobile VoIP technology through a partnership with Hutchison 3G UK, headquartered in London and more commonly known simply as 3. A Skype spokesperson confirmed that the company is "working with 3 to make Skype completely mobile," but refused to give details of the deal.

Mobile VoIP phones have thus far made sense in relatively stationary wireless environments, such as homes, offices or Internet cafés. The emergence of mobile VoIP phones changes the dynamic in the communications-provider market, taking away some of the cell phone carriers' power to charge by the minute. Still, mobile VoIP phones are not in a position to render cell phones obsolete, particularly because Wi-Fi signals cannot provide outdoor coverage as well as powerful cell towers do.

There are cordless phones that offer dual access to phone and Ethernet lines, but Skype's model poses the greatest threat to phone carriers such as Verizon and Sprint. This is because it takes customers completely away from using cell networks, which bring in a substantial chunk of carriers' profits. "Skype is the most disruptive model for the carriers," says Bill Kish, chief technical officer and co-founder of Ruckus Wireless, a Wi-Fi hardware and software maker in Sunnyvale, Calif.

The emergence of sophisticated mobile devices such as Apple's iPhone will further drive the demand for more comprehensive Wi-Fi coverage. "The iPhone has a proper browser, but you don't want to be surfing over a cellular network," Kish says. "Wi-Fi was designed from the start to handle data, whereas cellular networks were built for voice."

Some carriers have begun to recognize the disruptive nature of mobile VoIP. In late June, T-Mobile USA launched its HotSpot @Home service that works with new Samsung and Nokia mobile phones to let customers use a single phone for both Wi-Fi and cellular calls. This allows T-Mobile HotSpot @Home customers to switch to the company's cellular network when they leave the range of their home Wi-Fi hookup.

The price is right, says Michael Gartenberg, a wireless technology analyst for JupiterResearch, although he notes that ultimately it comes down to service and quality: "If you can't hear the other person," he says, "it doesn't matter how cheap it is."

Motorola progress on mobile operations

Motorola managed to climb back into profit in the third quarter – its first quarterly profit this year - and signalled progress in its efforts to turn around its struggling mobile phone operations despite continuing market share losses.

Third-quarter profits fell by 94 per cent to $60m, or 3 cents a share, compared with $968m, or 39 cents a share a year earlier. Revenue fell by 17 per cent to $8.81bn. But Motorola's shares gained about 5 per cent in early trading as investors took comfort from a more positive outlook that beat Wall Street expectations.

The company said it now expected earnings from continuing operations of 12 cents to 14 cents a share in the fourth quarter compared with the 10 cents a share that analysts were expecting. "The third quarter was about progress," Ed Zander, Motorola’s chief executive, told analysts in a conference call but added, "we also recognise there's a lot of work to do."

The Illinois-based company and Mr Zander have been under pressure after misreading the market and relying too heavily on sales of the ageing Razr phone for too long. Since the start of the year Motorola has cut costs aggressively and has rolled out a series of new handsets in an effort to turn the mobile phone operations around amid heightened competition.

The latest results which included slight gains in profitability and average handset selling prices, coupled with a rosier fourth-quarter forecast, should ease pressure on Mr Zander who has faced calls from some shareholders for his resignation despite surviving a proxy battle launched by Carl Icahn, the Wall Street investor.

In the third quarter, Motorola shipped 37.2m handsets and revenues in the mobile-device unit fell by 36 per cent to $4.45bn. The segment lost $248m, compared with year-earlier earnings of $843m. Motorola said in July that it did not expect the unit to be profitable by year-end, although it did expect financial results to improve during the second half of the year and has said it will be profitable again next year.

Motorola's share of the global handset market is estimated to be 13 per cent, down 50 basis points from the second quarter, ranking Motorola number three behind Finland”s Nokia which has widened its lead and Korea’s Samsung Electronics which has also been growing its market share. In the latest quarter Motorola continued to lose market share in the Asia Pacific region, including India, but it regained its lead in Latin America and kept its lead in North America.

"We see the industry growing in the double-digit-plus range," said Greg Brown, Motorola's president and chief operating officer. He added the company would be pushing more third-generation, or 3G, phones, as demand increases.

Mobile Business Expo: Microsoft's New Mobile Platform May Be WinMo's Tipping Point

Microsoft has tried to make Windows Mobile the default standard for business mobility for over four years now. Yet, Microsoft is only on track for 20 million phone units worldwide. That's a drop in the bucket compared to the global market of 1.2 billion handsets that are expected to ship this year.

Initially, almost all the market analysts I knew thought long ago Windows Mobile would kill its competitors, especially in the business market. And while Windows Mobile has taken off with vertical markets, it's still far from the global gold standard.

I noticed with the last upgrade of Windows Mobile that Microsoft stopped talking about mobile e-mail and started stressing its platform. This indicates Microsoft's strategic shift. And despite some amusing confusion with branding, Microsoft is no longer trying up sell Windows Mobile on the back of Exchange. It's trying to offer Windows Mobile as a part of a comprehensive device management solution.

Microsoft's new platform, called System Center Mobile Device Manager (OK, so it won't win any awards for creative naming), takes the emphasis off e-mail and puts in on three areas: device management, transport, and security. Guess what, these are areas that Microsoft can win in.

It also recasts smartphones and mobile devices in the mode of laptops and not wireless handsets. Why is this important? It allows Microsoft to sell to CIOs on terms with which both IT managers and Microsoft are comfortable. In short, Microsoft isn't trying to replace RIM. It's trying to recast mobile as an IT issue, not a carrier issue that IT managers pay others to manage for them.

It also shows that Microsoft is serious about winning the device management sector. Device agnostic mobility platforms like Sybase iAnywhere, Smith Micro, and Odyssey Software should be scared. Startups like Mformation should be really, really scared.

As I have pointed out on this blog before, device management has emerged as the next competitive battleground for business mobility. While services like mobile e-mail become a commodity, device management will be the differentiator.

Can Microsoft use device management to win the business mobility market? Or will Windows Mobile continue to limp to mediocrity?