Microsoft to buy phone maker Danger

Is Microsoft’s Danger play a poke at Apple? Google?

Microsoft said Monday that they’re acquiring Palo Alto, CA-based Danger Inc., maker of the T-Mobile Sidekick QWERTY smartphone.

Sidekicks feature a novel flip-up screen that reveals a full-size keyboard making easy work of texting and email. It could even be argued that the Sidekick (which the company brands “Hiptop“) was one of the pioneers of the QWERTY smartphones. Wikipedia has a good history of the device.

So what’s Microsoft’s interest in Danger, Inc.? Their Windows Mobile platform conflicts with Danger’s proprietary OS. According to Danger’s developer Web site:

Danger has written its own operating system and JVM for the hiptop. The Operating system has preemptive multitasking and a soft real-time scheduler, and it has been tuned specifically for running our JVM. All end-user applications are written in Java, as is the overwhelming majority of the high-level operating system. Arguably, Danger has the premiere “Java Operating System” on the market today.

Microsoft said the acquisition will align Danger’s expertise in the mobile-consumer space with Microsoft’s focus on expanding its mobile offerings.

“The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like,” said Robbie Bach, Microsoft’s president of entertainment and devices.

Full coverage of Robbie Bach’s keynote address at Mobile World Congress 2008 in Spain is on MSN Money Central.

iLounge has a good analysis of the Sidekick timeline:

Danger’s lack of forward momentum began to make sense when its founders were revealed to have left the company to start Android, a venture Google purchased and built into a widely-discussed open mobile phone platform.

(emphasis mine)

Clearly Microsoft isn’t buying Danger for the Hiptop OS. The acquisition appears to be a hardware play. Microsoft most likely wants to leverage Danger’s experience building mobile handsets to develop a ZunePhone to compete with iPhone and the Google phone. iLounge contends that Microsoft is “folding the unit into the gaming and media device.”

It’s a curious move though because Microsoft has always maintained that they don’t want to be a hardware company and want to leave that side of the business to their partners.

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The software giant said Monday that it's acquiring Danger, the Palo Alto, Calif.-based maker of the T-Mobile Sidekick for an undisclosed amount.

The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like," Microsoft entertainment unit President Robbie Bach said in a statement.

Microsoft Buys Danger, Sidekick Makers

Microsoft’s wad may have failed to woo Yahoo yesterday, but they’ve had more luck flashing the cash at the software firm Danger Inc, makers of the software that powers T-Mobile’s hugely successful SideKick web phone.

Also known as the Hiptop, the gadget has proved a hit with American schlebs, including the ever-vacuous Paris Hilton.

Microsoft said that it saw the Sidekick’s customer base as, “young and enthusiastic, Internet-savvy and socially inclined,” while bigging up the Danger team as having, “a deep understanding of consumers and a hold on what people want from mobility, making it an ideal group to work with in delivering connected experiences.”

Speaking at the Mobile World Congress in Barcelona, Robbie Bach, Microsoft’s president of entertainment and devices, said: “It completes the picture for us in terms of making the transition from just being on the business side of things to being on the consumer side of things.”

We can’t say that the Sidekick has ever hastened our heartbeats, but for chattering teens, hyperactive night hawks and celebs out for night on the Columbian marching powder, the quick instant messaging, e-mail and web access has made the phone something of a cultural icon.

With the dust still settling from the back-slapping, Jupiter Research analyst Michael Gartenberg described Microsoft’s acquisition as the “real excitement” of the first day of the Mobile World beano.

“The SideKick had strong appeal as the anti-Blackberry for younger audiences and it will be really interesting to see how Microsoft integrates the technology, business model, and overall device cachet to a culture more at home to selling to enterprise CIOs than it is to selling rock stars,” he observed.

Microsoft hopes that by mixing up Danger’s Web browsing, e-mail, instant messaging, games, multimedia, and social networking expertise with Microsoft’s MSN and Windows Live assets, they could create something truly fantabulous to overshadow the fast-rising iPhone.

Consumer Smartphones by Microsoft

Mobile Technology is showing the strength of utility and demand ,
Microsoft said on Monday it would acquire Danger, a maker of consumer smartphones, an indication that the software giant is quickly moving to expand its mobile strategy.

The acquisition came after an on-again, off-again series of talks with Danger, based in Palo Alto, Calif., beginning in the middle of last year. According to a person familiar with the negotiations, Microsoft ultimately doubled what it was willing to pay to keep Danger out of the hands of other suitors, including Google.

Terms of the purchase were not disclosed.

The transaction is evidence of the accelerating shift away from the personal computer and toward a proliferating array of hand-held devices that can access information and entertainment on the Internet.

The rapid emergence of this capability is likely to have the same impact on the popularity of smartphones as the rise of the graphical user interface had on the personal computer industry. Microsoft, based in Redmond, Wash., and which dominates the PC market, wants to be a leader in this new market for the hand-held computers.

After stumbling for years in the mobile phone business with its Windows Mobile software, Microsoft has recently won over Palm, Motorola and other cellphone makers. However, Microsoft’s software has been more popular in smartphones made for business users, rather than consumers, several analysts and industry executives said.

Analysts said that the acquisition, could be a hint of a broader plan by Microsoft to build a consumer strategy around brands like Yahoo, which Microsoft recently bid $44.6 billion to acquire.

“Microsoft is lining up every asset it can get to challenge Research In Motion and Google’s Android,” said Richard Doherty, president of Envisioneering Inc., an industry consultancy. R.I.M. makes the BlackBerry cellphone, and Android is the operating software for cellphones developed by Google.

Danger, founded in 2000 by three engineering veterans of Apple, WebTV and General Magic, designed a soap bar-sized cellphone, the Sidekick, that was one of the first mobile devices to give consumers easy access to wireless data beyond electronic mail.

Early on, the Sidekick, which was distinguished by a fold-out screen that opens like a switchblade knife, attracted a celebrity following that helped the company make inroads into consumer and youth markets. But it missed early opportunities to expand its service provider alliances beyond T-Mobile, the third-ranking cellular carrier in the United States, limiting Danger’s ability to grow quickly.

Currently the Danger handsets are manufactured by Sharp Electronics and by Motorola.

In a Securities and Exchange Commission filing last December to raise $100 million, Danger said that its revenue rose to $56.4 million in its fiscal year ended Sept. 30, from $49.3 million in the previous year. It reported that it had 923,000 customers, most of them through its T-Mobile Sidekick line of devices.

In an interview on Monday, Henry R. Nothhaft, Danger’s chief, said the company had strong holiday sales that pushed the company close to profitability and took its subscriber base to close to 1.2 million.

Microsoft indicated to him that it plans to continue to invest in Danger and expand it beyond its current 300 employees and 60 contractors, he said.

“I think they view us as a foundation for their consumer Internet experience,” he said.

Although he declined to comment on the “select” list of companies that had been interested in acquiring Danger, Mr. Nothhaft said that he owned 11 thoroughbred horses and that during the negotiations Danger executives had assigned one of his horses’ names as a code name for each possible deal. He said that he had more horses than potential deals, but that he had run through a number of the names.

Like much of the Valley’s mobile computing technology, Danger has its roots in Apple during the late 1980s. All three of the founders worked at Apple as engineers. Two of the founders, Joe Britt and Matt Hershenson, have remained with Danger, leading its technical direction.

The third founder, Andy Rubin, left Danger to form Android, which was acquired by Google in 2005. The cellphone software it was developing became the basis for Google cellphone software announced last year.