Microsoft forms joint venture with Ericsson

Microsoft, the world's largest software company, yesterday showed its determination to play a role in the fast-emerging business of hand-held, wireless computing by establishing a wide-ranging joint venture with Ericsson, the Swedish telephony group.

Ericsson, whose shares climbed 12 per cent on the news to close at 549 Swedish krone (€64.04), said the alliance would ultimately boost demand for mobile Internet services by creating new software applications.

"This will lead to higher demand for communications between the Internet and mobile devices, and to higher demand for communication between mobiles and offices. That should give us more sales of infrastructure and handsets," the company said.

Ericsson will have the majority stake in the joint venture.

Microsoft has had limited success in winning support for its Windows CE operating system among wireless telephone manufacturers. The joint venture with Ericsson will use Epoc, a new operating system being adopted by the Symbian consortium comprising Ericcson, Nokia of Finland, Motorola of the US and Psion of Britain.

News of the agreement sent Psion shares down 40 per cent. However, they recovered to close off 4 per cent at £26.38 after Ericsson said it remained committed to Symbian.

Nonetheless, it is clear that Microsoft is determined to participate broadly in the emerging mobile Internet market. As a result of this and other recent developments, Symbian's role could become narrower than originally envisaged. In October, Nokia, another Symbian partner, allied itself with Palm Computing of the US by adopting Palm's pen-based interface technology to run in conjunction with Symbian's Epoc operating system.

Symbian's Epoc operating system incorporates an Internet browser, e-mail and other applications, some of which may now be displaced by Microsoft software on Ericsson mobile phones.

For example, Ericsson and Microsoft will adopt a new Microsoft Internet browser program designed for use on mobile telephones and similar devices.

The two companies said they would collaborate in the development of technologies to link corporate e-mail systems to public wireless networks so that users could access messages, calendars and other information from any wireless device.