Surprise: That Mobile Is Running Windows

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"It's a much more powerful device," says Brent Wilkins, a Cantor managing director in charge of the firm's wireless technology initiatives.

Microsoft also helped itself by changing its approach to the business. Handset makers and mobile phone carriers have been nervous about working with the software giant, fearing that it would marginalize them. But in recent years, the company has focused more on using Windows Mobile to enhance its Exchange e-mail server software business, so much so that the most recent version of the product includes technology to push mail to users. RIM sells that technology. "It's a very crafty strategy on Microsoft's part," says IDC Group Vice-President Randy Giusto. "It puts some pressure on RIM."

Disputes the Numbers

Those improvements, along with the global familiarity with Microsoft's software, helped it leapfrog BlackBerry. IDC's estimates for 2006 worldwide market share for so-called converged devices—mobile phones that can handle e-mail and surf the Web—put Microsoft's share at 9.8%, compared with 7.3% for BlackBerry. Still, BlackBerry held the U.S. lead through the first nine months of 2006, with a 49.4% share versus Windows Mobile's 29% share. And worldwide, both significantly trail Nokia (NOK)-backed Symbian, the mobile-operating system that's huge in Europe and Japan.

But even as BlackBerry works to expand its business globally, IDC believes that Microsoft will grow share faster. It projects BlackBerry share to climb to 9.2% this year and work its way up to 10.4% by 2010. At the same time, Windows Mobile's trajectory is much more rapid, expected to hit 22.1% in 2010.

RIM co-CEO and Chairman Jim Balsillie disputes IDC's data, saying that BlackBerry's worldwide share still tops devices running Windows Mobile. He declined to share proprietary numbers that he claims refute the IDC numbers, instead offering anecdotal evidence. "If Windows Mobile is selling so much, where are they?" Balsillie asks. "I don't see them." As for Microsoft gaining momentum, Balsillie says, "I haven't seen it" (see BusinessWeek.com, 12/22/06, "Research In Motion's Record Year").

There's little question Microsoft still has much work ahead. Some tech buyers remain leery of Windows Mobile security, while some handset makers are still wary of working with the software giant. But with LG onboard, Microsoft shows it still may have some tricks up its sleeve.

Greene is BusinessWeek's Seattle bureau chief.