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Published May 6, 2011

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Smartphones
Microsoft Updates Mobile Presence With AT&T
Agustino Fontevecchia, 10.11.10, 02:55 PM EDT
Software firm unveils Windows Phone 7 operating system, related devices.

In what appears to be a major strategic step by Microsoft, the software giant CEO Steve Balmmer announced a partnership with AT&T to run their new operating system, Windows Phone 7, on their network, as he showed off nine new smartphones that will carry the software.

“The windows phone redefines the game,” said Ballmer at the official presentation Monday in New York. Nine phones were presented which would run mainly on AT&T ( T – news – people )’s mobile network, with some running on Deustche Telekom’s T-mobile network; they are expected to be priced at $ 199.99 with a two-year contract.
Windows Phone 7 is the culmination of an overhaul in Microsoft ( MSFT – news – people )’s mobile business, as Andy Lees, who joined the software company in 2008 and was named president of mobile business two weeks ago, helped to revitalize the department.

Microsoft has been a laggard in the mobile market, with Windows Mobile, their older operating system, accounting for just 5% of the worldwide market, as opposed to the 41% held by Symbian, which runs on Nokia ( NOK – news – people ) phones, 18% for RIM ( RIMM – news – people )’s BlackBerry’s, 17% for Google ( GOOG – news – people )’s Android , and 14% for Apple ( AAPL – news – people )’s iPhone, according to research firm Gartner.

The new operating system seeks to differentiate itself from its competitors, namely Apple’s iPhone and Google’s Android operating system, which has become the top selling smartphone system in the U.S.. “Live tiles,” instead of applications, guide the interface, informing users of Facebook updates or showing the album cover of the song being played. Microsoft will integrate its Vuze music software, in part the inspiration for Windows Phone 7’s interface, to the operating system, while AT&T will fuse its U-Verse mobile TV service to the phones.

The new operating system will allow users to use Microsoft Office and coordinate easily with PCs, it will also allow users to connect to Xbox live, Microsoft’s online gaming community; AT&T will offer U-Verse subscriptions for the Xbox live users as well.

Microsoft has lined up 60 carriers in more than 30 countries, and expects to release the phones by October 21 in Europe and November 8 in the U.S. Microsoft’s deal with AT&T comes amid recent reports that Apple is developing an iPhone to be carried on Verizon ( VZ – news – people ) Wireless starting in 2011, and will end the device’s exclusivity with AT&T.

The markets accepted the deal, with Microsoft’s shares up $ 0.05 or 0.2% to $ 24.62 and AT&T’s stock up $ 0.08 or 0.3% to $ 28.30. Monday, a slow day for the markets due to the Columbus Day Holiday, saw investors unworried about the effects of the deal on Verizon, with its shares up $ 0.14 or 0.4% to $ 32.97.