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Tuesday, February 12, 2008 - Page updated at 12:00 AM

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Microsoft finds Danger fits its cellphone strategy

The Associated Press

Microsoft agreed Monday to buy cellphone-software maker Danger, strengthening its position in consumer mobile phones and building its defenses against a major Google initiative.

Danger, a Palo Alto, Calif.-based company, builds Web browsing, messaging, social- networking and other software for mobile devices.

The vast majority of its revenue — $50.6 million in 2007 — comes from selling its technology to a single client — Bellevue-based T-Mobile USA for its Sidekick phones, according to a filing with the Securities and Exchange Commission.

The companies did not disclose financial details of the deal.

But RBC Capital Markets analyst Mike Abramsky told Bloomberg News he estimated it was between $100 million and $200 million.

Danger announced plans to go public in December, shortly after Google revealed a new cellphone-software package of its own called Android, backed by major phone manufacturers and wireless operators and freely available to programmers.

In a Silicon Valley twist, Danger was founded by Andy Rubin, who went on to start Android, which Google bought in 2005.

Ramon Llamas, an analyst for technology-research group IDC, said the deal is interesting because Danger devices like T-Mobile's Sidekick and SunCom Wireless' Hiptop reach a new demographic for Microsoft's mobile efforts: instant-messaging-obsessed teens and 20-somethings.

Microsoft's purchase was one of a flurry of partnerships and ad deals unveiled Monday at the Mobile World Congress in Barcelona, Spain.

The news also included the unveiling of the first Sony Ericsson device to run Microsoft's Windows Mobile operating system.

"All these announcements are really supporting the strategy of moving beyond the business and personal productivity slots and into more of an entertainment" niche, said Pieter Knook, a senior vice president of Microsoft's mobile-communications business, in an interview last week.

Knook said Microsoft expects to nearly double sales of Windows Mobile licenses in 2008 to more than 20 million, from 11 million in 2007.

The company is fighting to gain a greater market share of smartphone operating systems. Worldwide, it lags Symbian, which powers all of Nokia's smartphones, and open-source Linux systems that run many phones in Asia, according to IDC data.

In the U.S., Windows Mobile is No. 2 behind Research in Motion's BlackBerry operating system, as of the end of the third quarter of 2007.

Microsoft also hopes to snag more mobile-advertising revenue, a nascent market expected to grow rapidly as the technology improves.

The research firm eMarketer estimated mobile-ad spending will rise to $4.8 billion in the U.S. alone in 2011.

Copyright © 2008 The Seattle Times Company

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