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Microsoft Unveils Phones in Bid to End Share Losses

Microsoft Corp. unveiled nine new phones with its Windows operating system after an overhaul aimed at reversing share losses to Apple Inc.’s iPhone and Google Inc.’s Android software.

The Windows phones will be sold in the U.S. by AT&T Inc., the country’s largest phone company, and Deutsche Telekom AG’s T-Mobile USA unit, the companies said today in a statement. AT&T will sell the phones starting on Nov. 8 and the devices will go on sale in Europe on Oct. 21, the companies said at events in New York and Germany.

The Windows Phone software features a new design, the ability to take and post photos faster and connections to Facebook and Microsoft’s Xbox Live game service. With market research firm Gartner Inc. predicting smartphone sales will eclipse those of personal computers in the next two years, Microsoft’s mobile business is in need of a quick turnaround.

“Handsets are a critical market if Microsoft is going to expand their business beyond PCs,” Ross Rubin, an NPD Group Inc. analyst, said in an interview. “Windows Phone 7 will offer an interface that will be familiar to some and offer a new experience to others; it is a matter of taste.”

The phones are being made by HTC Corp., Dell Inc., Samsung Electronics Co. and LG Electronics Inc.

The phone software organizes activities into tiles that update with new information. Users can scroll down and side to side to navigate. The software also includes Microsoft’s Zune music subscription service and mobile versions of the Office applications.

Complete Overhaul

The product is the result of an overhaul of the company’s mobile-phone software. Andy Lees, named president of the mobile business two weeks ago, joined the group in 2008 and opted to scrap work on a planned release and start from scratch.

“The phone is very important to us and the Windows Phone redefines the game,” Microsoft Chief Executive Officer Steve Ballmer said in a televised interview from the New York event. “If you just take a look at compared to where we are in the market, I think this is a more modern experience than a number of the guys have there.”

Ballmer said he expects the new devices will help Microsoft retake market share.

To gain ground, Microsoft must win over more than just customers. The company must also persuade carriers and handset makers to devote significant resources and marketing muscle to Windows, said Kevin Burden, an analyst at ABI Research.

Android Rising

It’s a harder task given the popularity of Android, which has become the top selling smartphone operating system in the U.S, according to Gartner. When HTC made the first ever phone with Windows software in 2002, the company was almost unknown in the handset space. Now it’s the maker of some of the most popular Android phones.

“The mobile space is really important and Microsoft certainly needs a good play there,” said Burden, who is based in Hopkinton, Massachusetts. “It’s a huge problem if this doesn’t help them take share.”

More than 60 carriers in more than 30 countries will sell the phones, including America Movil SAB, Latin American’s largest carrier, Deutsche Telekom, Orange SA, Singapore Telecommunications Ltd., Telstra Corp. and Vodafone Group Plc.

AT&T will put its U-verse television service on Windows Phone 7 devices so customers can download and watch TV shows on the go, the first time an AT&T U-verse service will be available nationwide. The company will also offer the service on existing Microsoft’s Xbox 360 video-game consoles starting this week.

App Challenge

The company said thousands of developers, including Electronic Arts Inc., eBay Inc. and Imdb.com Inc. are working on applications and didn’t disclose the number that will be available when the phones go on sale. There are more than 250,000 apps available for Apple’s iPhone and more than 70,000 for Android.

Microsoft’s share in the global smartphone market fell to 5 percent in the second quarter, from 9.3 percent a year earlier, according to Gartner. Android climbed to 17 percent from 1.8 percent, while the iPhone rose to 14 percent from 13 percent. Nokia Oyj’s Symbian software held 41 percent of the global smartphone market in the second quarter, down from 51 percent a year earlier, and BlackBerry-maker Research In Motion Ltd. had 18 percent, down from 19 percent.

Microsoft said it opted not to do a CDMA version of the program until next year, meaning Verizon Wireless and Sprint Nextel Corp., which use that technology, will not be offering phones with the operating system for sale initially.