Kara Swisher

Recent Posts by Kara Swisher

Microsoft's New Mobile Phone Software Is Coming (and Its "Project Pink" Still Lives)–But Should It Just Give Up and Buy RIM?

Next week at the Mobile World Congress in Barcelona, Spain, Microsoft is likely to unveil Windows Mobile 7, the new version of its mobile operating system, trying to create some excitement around its foundering mobile strategy.

“Foundering” is probably kind, given the innovative strides both Google (GOOG) and Apple (AAPL) have made in the smartphone arena in recent years by comparison.

That’s why rumors about the various attributes of the new mobile OS escalated again after Microsoft (MSFT) CFO Peter Klein noted at the company’s most recent earnings call: “As we have been saying from a product perspective, we are working very hard on the next version of Windows Mobile…we will be talking more about that in Barcelona in a few weeks.”

The most prominent of those rumors is that the new OS morphs into a kind of “ZunePhone,” incorporating functionality from the software of Microsoft’s digital music player.

And as one hand does software, Microsoft has also been doing the smartphone equivalent of a Long March with its “Project Pink,” the long anticipated multimedia touchscreen device that has been in development for a while by its Premium Mobile Experiences group.

That team is apparently hidden away in a Seattle office–as opposed to its nearby Redmond, Wash., HQ–and still includes some employees from Danger, the iconic company that designed the once-popular Sidekick mobile phone and was bought by Microsoft in 2008 for $500 million.

There, both Microsoft-designed hardware and software are being created, with some sort of device to come out this year, sources said, despite persistent rumors that the whole project would be scotched.

The hope–when the tech giant finally does end this very long gestation–is that it can finally get some traction in the increasingly important smartphone space, which is dominated by Apple’s iPhone and, farther behind, phones using Google’s Android operating system.

While Microsoft tirelessly argues that Windows mobile software is on many more phones around the globe than that of competitors, the challenge is clear externally–and internally, if you listen carefully to the griping about the company’s mobile strategy, which one exec there recently admitted to me was an “embarrassment.”

Indeed, this is why Microsoft and its giant wallet might be better served by buying one of the big and more established telecom companies, such as Research in Motion (RIMM), Palm (PALM) or even–as another Microsoft exec said to me, “Why not?”–Nokia (NOK).

Nokia has a market cap of close to $50 billion, with RIM at close to $38 billion. And Palm? A paltry $1.74 billion. Microsoft’s current valuation is $246 billion, and the company has $40 billion in cash and marketable securities on hand.

While the purchase of Danger was pricey given how little it has yielded as yet, to do such a deal would send shock waves throughout the industry and–if it were Nokia or RIM, both of which are non-U.S.-based companies–change the game immediately.

And, in fact, many sources at Microsoft have told me that CEO Steve Ballmer has expressed interest in buying RIM many times (while also dismissing any interest in Palm).

Well, at least, Ballmer is thinking big. And he should, because mobile, which everyone knows is the key platform in the coming era of computing, will be all about getting–as the saying goes–big or getting out.

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