Hot Stocks: Windows Phone 7 Will Give Microsoft a Boost

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Microsoft Corp. (Nasdaq: MSFT) has unveiled a lineup of smartphones that use its revamped Windows Phone 7 mobile-operating system in its boldest move yet to return to prominence in the mobile business.

The new operating system, which it spent two years developing, is the software giant's latest assault on the crowded smartphone market, where it has struggled to gain a foothold.

Microsoft's earlier mobile software was based on the design and interface of Windows desktop operating system. Although those phones showed early promise, the system's growth slowed dramatically as the company was upstaged by competitors like Apple Inc.'s (Nasdaq: AAPL) iPhone and Google Inc.'s (Nasdaq: GOOG) Android software.

To distinguish itself from competitors, the new Microsoft software displays commonly used applications on a home screen in large blocks - dubbed tiles - rather than the array of many small icons found on competing smartphones. The tiles are constantly updated with fresh content from the Internet, such as status updates or new photos from a user's Facebook friends.

"This is a different kind of phone," Microsoft Chief Executive Steve Ballmer said at a launch event in New York.

A key part of Microsoft's strategy is its plan to spend more than $100 million on a new advertising campaign for Windows Phone 7. The ads focus on the difficulties that people face when they become too absorbed in their smartphones - from unsafe driving practices to annoying interruptions in public places.

The point of the ads is to underscore how Windows Phone 7 is designed to let people to function more efficiently without needing to constantly fumble around with their devices. The tag line of one of the ads: "It's time for a phone to save us from our phones."

All Windows Phone 7 devices will have camera buttons on them so people can quickly shoot photographs, even if the devices are locked with a password.

Microsoft has unveiled nine handsets planned for the holiday season, including the Focus by Samsung Electronics Co., the Quantum by LG Electronics Inc., and the Surround from HTC Corp.

Ballmer said that AT&T Inc.'s (NYSE: T) network will support the new phones beginning early in November, followed by T-Mobile later this year and Verizon Communications Inc. (NYSE: VZ) and Sprint Nextel Corp. (NYSE: S) next year. In all, Microsoft says phones using its software will be available in 30 countries from 60 carrier partners.

Microsoft also is attempting to turn a potential liability - the small number of applications it will have for Windows Phone 7 compared with the tens of thousands of apps available for Google and Apple devices - into an advantage.

In a recent interview, Terry Meyerson, corporate vice president of Windows Phone engineering, said Microsoft will take a more active role in managing the apps available for Windows Phone 7 than its rivals do, partly to weed out "knock offs" of popular apps.

"Windows is a platform that cannot be ignored," Darren Cross, head of business development for Comcast Corp.'s (Nasdaq: CMCSA) Fandango movie ticketing service, which has developed a Windows Phone 7 app told The Wall Street Journal. "This is a very fresh take."

Microsoft's net income jumped 48% to $4.52 billion in the second quarter, from $3.05 billion, or 34 cents per share, last year, largely as a result of sales increases from the release of its Windows 7 desktop operating system. Revenue rose 22% to $16.04 billion, from $13.1 billion in the same period a year ago.  The results were stronger than Wall Street had expected.

Microsoft is betting that the Windows Phone 7 will give the company another sales boost. 

Gamers are expected to be one source of increased revenue.  Matt Thompson, a Microsoft executive said recently that the company will be developing 2D and 3D games that will offer the owner Xbox Live on their mobile, a likely source of new revenue.

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