For Microsoft: Danger, indeed

Danger is the edgy company that makes the Sidekick, a smartphone designed with teens in mind. Microsoft used to be an edgy company, and would like to be again. If you need a more precise reason why Microsoft has bought Danger you only have to look at the statistics on smartphone sales for the last quarter. Microsoft, the company that hates to lose, is losing bigtime.

Microsoft has pushed its Windows Mobile operating software for smartphones hard for years --- it's now up to Version 6. But it still doesn't dominate its market. This must be very frustrating for Microsoft, and it's got to be getting even more frustrating as it becomes obvious that converged devices are the wave of the computing future, and Microsoft, far from improving its position, is actually losing market share.

Christmas was not a happy season for Microsoft's mobile business. U.S. sales of mobile phones running Windows Mobile fell to third place behind the BlackBerry and – gasp! -- the iPhone. RIM's BlackBerry holds 41 percent of the smartphone market, which is still largely an enterprise market. But the iPhone jumped to 28 percent. And phones running Windows Mobile fell to 21 percent.

There was even worse news, though it went largely unnoticed: A survey by Opinion Research Corporation concluded that – this is a direct quote from the press release, because the wording is interesting -- ". . . smartphones (excluding iPhone and RIM Blackberry) were the most returned electronic technology products of the holiday season, with slightly more than one-fifth (21%) of smartphone buyers returning their purchase to the retailer."

If you exclude the iPhone and the BlackBerry, what are you left with? Right.

Windows Mobile has not won the hearts and minds of a market that is going to be very, very important. Microsoft needs a much more competitive product. And if it can't develop itself in six tries, it can at least buy some developers who've demonstrated that they can.

Buying Danger doesn't mean that Microsoft is getting into the handset business. In fact, far from it. I suspect the Sidekick's days are numbered. (Its Hiptop OS, after all, is based on – shudder! -- Java. The only thing that could have been worse, from Microsoft's viewpoint, would have been Linux.) But the development team at Danger has proved that it knows how to create an attractive, usable user interface for very small devices. That's what Microsoft needs more than anything else. And that's why Microsoft dug deep to make the buy.

Putting Danger in charge of turning Windows Mobile into an attractive, usable mobile OS could be a very good idea for Microsoft. (And even if it doesn't work out and the Danger team is smothered by Microsoft bureaucracy, at least the acquisition keeps Danger out of the hands of – ugh! – Google's Android or some other Linux-based competitor.)

This is a crucial play for Microsoft. Worldwide, its problems in the smartphone market are even greater than in the United States. (Nokia and Symbian hold 53 percent of the international market.) The iPhone has shown how good a converged device can be and how well a good device can sell, and the latest sales figures show that Microsoft doesn't have a horse in the race.