Analysis: Flash Lite may give Windows Mobile a fighting chance against surging iPhone

Deal for Microsoft to license Adobe technology could benefit each of the software rivals

After being publicly scorned by Apple Inc. CEO Steve Jobs earlier this month, Adobe Systems Inc.'s Flash Lite mobile media player on Monday found itself in the warm embrace of a strange bedfellow: Microsoft Corp.

Despite their longtime mutual dependence — Adobe sells most of its software on Windows — the two vendors recently have quarreled like unhappy housemates as they compete more directly with each other in the Web development tools and rich applications markets.

But yesterday, Adobe announced that Microsoft has licensed Flash Lite for eventual use as a plug-in for Internet Explorer on phones running Windows Mobile. Microsoft didn't say when it will begin supporting Flash Lite and the Adobe Reader LE software, which it also licensed, on Windows Mobile.

Some analysts and Flash advocates said the deal should help boost Adobe's chances of reaching its ambitious goal of getting Flash Lite installed on a billion mobile phones by 2010. That, in turn, could help Adobe sell more of its Flash development and media streaming tools.

Adobe claimed on Monday that it now is halfway to the 1 billion phone mark for Flash Lite.

But that technology isn't a big money-maker yet, said Hayden Porter, a Flash developer in Akron, Ohio, who is bullish about the Microsoft deal. "I'm not sure a lot of North American developers can make their living on Flash Lite today," Porter said. "This helps bring Flash Lite into the mainstream."

For Microsoft, tying up with Flash Lite may help it revitalize the long-lagging Windows Mobile platform with a killer app: online video. "Microsoft wants the phone salesman to be able to say, 'With this Windows Mobile phone, you can watch any YouTube video you want,'" Porter said.

YouTube LLC streams videos on the Web via Flash at a 320-by-240 resolution that fits the Quarter VGA (QVGA) size of most smart phone screens. But screen size is only one requirement; others include having enough memory and CPU horsepower, as well as the ability to decode Flash videos.

Last year, YouTube began re-encoding some of its videos into the H.264 codec so that Apple's iPhone can view them. And in January, it launched a beta version of its YouTube for Mobile service, which lets a variety of other smart phones view many, but not all, its videos.

Still, YouTube is far from making all its videos equally accessible to Flash-enabled phones and devices that don't support the Adobe software. Couple that with growing demand for video, and "in a year, any phone that doesn't have Flash Lite on it is going to be at a competitive disadvantage," said Jack Gold, an analyst at J. Gold Associates. For Microsoft, he added, "not to do this deal would have been foolish."

Adding YouTube support via Flash Lite could divert attention away from complaints that the Windows Mobile interface remains less suited for the small screen than the ones on rival phones are, according to Gold. "Microsoft jams a lot of stuff in the Windows Mobile GUI," he said. "Because it's so rich, it can be hard to use."

But a possible downside of the deal for Microsoft — and why that company probably hesitated so long on pulling the trigger — is that it has been pushing a "Flash killer" tool of its own called Silverlight for the past year. Microsoft is banking on adoption of Silverlight to drive sales of its own Web design and development software.

Microsoft last week said that the first Community Technical Preview of Silverlight 1.0 for Windows Mobile 6 will become available by the end of June. It also recently inked a deal with Nokia Corp. to get Silverlight supported on phones running the Symbian operating system.

Supporting Flash Lite on Windows Mobile may cut into Silverlight's adoption. Nonetheless, it should be good for end users, Gold said. "This gives Microsoft a big kick in the butt to make sure the Silverlight experience works well," he noted.

Gold thinks the deal with Adobe should also help Windows Mobile from a public relations perspective, especially in relation to the open but embryonic Google Android platform and the still relatively closed iPhone. "This is a smart move because it has Microsoft saying, 'We understand that our phones have to be more open and be better international citizens,'" he said. On the other hand, the iPhone's image, he added, is that what Apple supports "is Apple stuff."

Windows Mobile had just a 13% share of the worldwide smart phone operating system market last year, leaving it well behind Symbian Software Ltd.'s 67% share, according to research firm Canalys Ltd.

Canalys said that from a hardware perspective, devices running Windows Mobile accounted for 21% of fourth-quarter smart phone shipments in North America, where Symbian phones are rare. But, the firm added, that left all Windows Mobile device vendors combined trailing behind Research In Motion's BlackBerry, with 41%, and the iPhone, which had a 28% market share just six months after it became available.

Despite Windows Mobile's relatively small market stature, Porter said he expects the deal between Adobe and Microsoft to dramatically increase the size of the pie for many Flash and mobile developers.

Flash Lite was available on 288 million phones that were in use at the end of last year, according to a report issued by Strategy Analytics Inc. in January (download Zip file). But only 32 million of those phones were in the U.S., with the vast majority in Asia and western Europe, the research firm said.

Moreover, the majority of the phones that are enabled for Flash Lite in the U.S. work on the Verizon Wireless network, which uses an application development platform that, according to Porter, is hard for smaller, independent programmers to profit from.

Although Porter is a fan of the yesterday's announcement, he would have preferred to hear Adobe and Microsoft announce a stand-alone Flash Lite player for Windows Mobile instead of a plug-in that forces content to be viewed and played inside Internet Explorer. "Streaming video broadcasters may like the plug-in, but for developers of casual games and offline apps, it doesn't address our needs very well," he said.

Copyright © 2008 IDG Communications, Inc.

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