Microsoft Targets VoIP Market With LG-Nortel Deal

Microsoft is continuing its slow assault on the VoIP market by signing a new deal with LG-Nortel to work together on VoIP products based on the next generation of WinCE. LG-Nortel is a joint venture between Nortel and cell phone manufacturer LG Electronics.

The deal between Microsoft and LG-Nortel is a memorandum of understanding (MOU) covering joint research and development, marketing, and licensing for WinCE 6. It extends an existing agreement between the two companies in which LG-Nortel developed a WinCE 5-based multimedia SIP phone.

The final agreement will be hammered out over the next several months, when designs for new WinCE 6-based IP phones will be announced. WinCE 6, code-named Yamazaki, is Microsoft's new development environment for the next generation of smart devices and smart phones.

The announcement is not getting much press, but this is a much more important deal than most people realize. Microsoft hasn't gotten a great deal of traction in the mobile phone market, and it's only just starting to make noise about VoIP.

But Microsoft has been quietly pursuing an increasingly network-centric strategy that focuses on data synchronization and collaboration, even in its desktop products. For example, Vista includes a Sync Center that will allow users to easily synchronize data across all their devices. That means that mobile phones and smart devices will be able to be synchronized with desktop PCs, making it that much more likely enterprises will opt for WinCE-based devices.Iit's not just VoIP that Microsoft is after in this announcement. You can be sure that multimedia IP communications will be part of the upcoming product line as well.

For Microsoft, the stakes are sizable. The announcement came out of the company's Mobile & Embedded Devices/Communications Sector (MED/CS) group, which Microsoft calls "the fastest growing business line among the seven Microsoft business groups."

What Microsoft doesn't like to say, however, is that the group is also operating in the red, reportedly to the tune of a $14 million loss for the quarter ending March 31st. That's a drop in the bucket for Microsoft, of course. But that's where future growth is, and the company knows that it needs to gain a sizable share of that market.

How much this announcement will help remains a bit unclear. We'll know better when the definitive agreement is made public in several months.