Microsoft invests in Sendo to push smart phone platform

Microsoft Corp. has taken a small stake in Sendo PLC, the 23-month-old U.K. mobile phone manufacturer that makes phones to order for mobile operators.

The software giant paid over US$10 million for a stake of less than 10 percent and has an option to increase its stake to about 20 percent, Sendo spokeswoman Marijke van Hooren said Monday.

The investment reinforces the existing relationship between Microsoft and Sendo, a company which was anonymous until Microsoft catapulted it into the spotlight earlier this year at the GSM World Congress in Cannes. Sendo was one of the first companies to show a smart phone running Stinger, Microsoft's operating system for such devices.

Both companies plan to co-develop products based on Stinger, according to Van Hooren. However, the companies are not creating a joint venture and will not exchange staff, she said.

The agreement with Microsoft is not exclusive; Sendo is free to equip handsets with the EPOC operating system, on which some competing smart phones are based, she said.

"But we have no plans on running or developing on any other operating system than Stinger," she said.

EPOC is developed by Symbian Ltd., a consortium led by U.K. handheld computer maker Psion PLC and made up of leading handset makers including Nokia Corp. and Motorola Inc., among others.

One analyst said Microsoft most likely regards its involvement with Sendo as a marketing arrangement to win over large handset makers to use Stinger.

"Microsoft is not getting attention from the major handset vendors. It will help market the smart phone to show off the product," said Peter Richardson, a vice president and chief analyst mobile communications with research firm Dataquest Inc., a unit of Gartner Inc.

For Sendo the investment will satisfy its cash needs, he said.

"Sendo would struggle without some assistance. It is small and its strategy is centered on inexpensive products that the market is moving away from. Developing a smart phone is an expensive exercise."

Sendo's first smart phone, the Z100 it demonstrated at the GSM World Congress in Cannes, is due out at the end of this year or early 2002, depending on the readiness of the GPRS (General Packet Radio Service) mobile data networks on which the phone will depend, Van Hooren said.

Stinger phones will offer compatibility with Microsoft Outlook's e-mail, address book and calendar. Additionally, the devices can play back music files in the MP3 (MPEG Audio Layer-3) and WMA (Windows Media Audio) formats, according to Van Hooren.

The Z100 prototype weighs a mere 99 grams, which makes it smaller and lighter than GPRS phones currently on the market, Sendo said. The device features a 65,000-color TFT (Thin Film Transistor) display and can be interconnected to a PC using USB (Universal Serial Bus), infrared or a serial connection, and has a slot for expansion cards.

Microsoft has also received backing for Stinger from South Korea's Samsung Electronics Co. Ltd. and Japan's Mitsubishi Electric Corp.

Sendo supplies mobile phones to Virgin Mobile in the U.K., Telecel Vodafone in Portugal and Telfort in the Netherlands, Van Hooren said, and the company is currently negotiating deals for the U.S. market. Trials with the tri-band Z100 are scheduled for later this year on the networks of three operators, she added.

Stakeholders in Sendo, besides Microsoft and Sendo's employees, are CCT Telecom Holdings Ltd., a Hong Kong-based manufacturer of wireless phones, and Silicon Valley investment firm Bowman Capital Management LLC. Sendo's phones are manufactured by CCT.

Sendo was launched as a design house in August 1999 with $10 million in funding from CCT. Hugh Brogan, the company's chief executive officer, previously worked at Motorola and was chief technology officer at Philips Consumer Communications NV, the now largely-defunct unit of Koninklijke Philips Electronics NV.

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