In 2000, when Microsoft began to suggest that it was thinking of entering the phone business, few people in the wireless industry knew how to handicap the company's odds of doing well. On the one hand, whenever Microsoft enters a new marketplace, it faces strong opposition from entrenched businesses who are rightly scared of its power. On the other hand, Microsoft is Microsoft; it's got money, contacts and technology that people know, and anytime it enters a market, competitors tend to take it seriously.

As far as it's possible to tell, Microsoft seems to have guessed from the beginning that the large phone makers wouldn't accept Microsoft with open arms, and it instead decided to try to attract smaller phone makers and the large cellular phone carriers. (Microsoft declined to discuss its broad phone strategy with Salon, but one of its mobile-product managers did answer some specific questions via e-mail.)

Microsoft has signed agreements with almost two dozen phone carriers around the world, including some of the largest -- AT&T, Cingular, Sprint, T-Mobile, Verizon and Vodaphone. Several of these have also pledged to release Microsoft smart phones -- but in what must be a novel experience for Microsoft, none of the agreements are exclusive.

"At the end of a day the operators don't care which operating system is on their platform," says Eden Zoller, the director of wireless research at Ovum, a tech research firm in London. "They're really quite promiscuous -- they'll go with anyone and wait to see what has critical mass in the market."

For Microsoft to gain critical mass, it obviously had to have phones out in the marketplace quickly, and in 2000 it set about signing up phone makers. Samsung, the world's third-largest handset manufacturer, was its biggest catch; the company has already unveiled its smart phone and "is making great progress towards the delivery of their device," according to Ed Suwanjindar, Microsoft's product manager of mobile devices. Microsoft also has deals with Compal and HTC, two big Taiwanese manufacturers; the smart phone released by Orange was made by HTC.

But Microsoft has clearly been uneasy over what has so far been a slow rollout of its smart phones. Perhaps in response to that, in July 2001 the company invested an undisclosed sum in a small, relatively unknown British phone maker named Sendo. It's not known for sure why Microsoft felt it needed to invest in a firm that had already agreed to release its products, but it appears that Microsoft was worried that Sendo wasn't moving fast enough in the development of its smart phone, called the Z100. Phil Holden, a director of Microsoft's mobility efforts, told News.com that the investment in Sendo would "give us the ability to work even closer on development and hopefully bring the product to market very quickly."

But Microsoft's partial ownership of Sendo doesn't seem to have made things faster, as Sendo kept pushing back its release date. Originally scheduled for release in the fall of 2001, many observers were saying that they were sure that Sendo would put out its Z100 by the end of 2002 at the latest.

And then in November Sendo suddenly said it would call the whole thing off. It put up a short notice on its site expressing regret over the decision, without explaining it. And everyone in the smart-phone business, including Microsoft, was left scratching their heads.

Marijke van Hooren, a spokeswoman for Sendo, was distressingly vague when asked about the details of her firm's decision. "The good news is, Nokia gives us access to the source code, which allows us to customize the phone to far more operator customers," she said. Then she added: "There were naturally other reasons why we had to take this course of action, but from a legal perspective I cannot go into that."

Was it a technology problem -- did Microsoft's software work? "It was a not a technology issue," she said. "I cannot go into all the details about it, but our business model is to offer very customized phones so they have something to distinguish themselves in the marketplace, which we cannot offer if we don't have the source code."

Microsoft dismissed this explanation. In an e-mail, Suwanjindar said that Microsoft's "shared source" model "provides partners with the APIs [application programming interfaces] they need in order to customize and develop applications for our platform."

Zoller, of Ovum research, says that she's heard from people at Sendo that it wasn't Microsoft's refusal to provide the source code as much as it was Microsoft's restrictive licensing terms that eventually soured Sendo on Redmond. "It's nothing to do with the actual Microsoft platform itself," she said. "But from all I can gather, Microsoft didn't allow them to do deep customization. Apparently the licensing terms that Microsoft imposes restricts that."

But Microsoft's Suwanjindar said he didn't believe that as well. He wrote: "Sendo has been testing our software for some time. If this were such a big issue for them, dont you think they would have noticed before? Pulling their product when they were so close to crossing the finish line is baffling." He also said that given other deals Microsoft has in the works, Sendo's turnaround amounted to only a "speed bump."

The market "is in early days," he wrote. "It's anybody's game and we're in this for the long haul."

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