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Once the preserve of business users, mobile phones have become an everyday consumer appliance--even a fashion accessory. Alcatel claims to have taken 10% of the world phone market with a cheap handset available in rainbow colors that appeal to women. The marriage of prepaid calling cards and cheap mobile phones has made markets in Italy, Ireland and Portugal grow nearly 38% a year because there is no subscription fee or phone bill at the end of the month. In Israel some 200,000 units of a phone known as the Mango, which can call only one number, have been sold: principally to parents, who give them to their children so the children can regularly phone home--especially those serving in the army. Sven-Christer Nilsson, president of Ericsson, recently observed that it took about 120 years from Alexander Graham Bell's invention of the conventional telephone to wire up 1 billion customers worldwide. Current estimates by mobile operators suggest the same number of mobile subscribers could be online by the year 2005. Little wonder that traditional computer companies are scrambling to enter the mobile business. Bill Gates, whose aim has been to put a PC on every desk, told a symposium in February that "Microsoft's vision for PCs five years from now is a wireless device you can carry around."
Unlike Psion, which produced the first digital organizer in the 1980s, Microsoft's entry into the world of palmtop computing began only three years ago, when the company rolled out Windows CE, a relative of the company's ubiquitous operating system now found on more than 90% of personal computers. Microsoft then signed up 10 manufacturers, including Hewlett-Packard, Sharp and Philips, to make hand-held computers to its specifications. Following the huge success of the Palm Pilot, the tiny organizer that uses a plastic pen instead of a keyboard, Microsoft enlisted another eight manufacturers to make a competing version of a similar unit. "Everybody is in market-development mode at the moment,'' says Dilip Mistry, Windows CE manager for Microsoft's British subsidiary. "I don't think anybody is making money in this yet. It's all about investing to see what happens going forward."
With his business under threat from Microsoft, Potter has cleverly realized that the mobile-phone companies would be as nervous about Bill Gates as he was. The history of the PC business showed that hardware companies were caught up in a cycle of steadily declining prices, while Microsoft and chipmaker Intel captured the lion's share of the profits. "I think there is a great deal of concern in many industries that the added value in their industries doesn't get taken away by Microsoft," Potter says.
That led Potter to approach Nokia, Ericsson and later Motorola--which has agreed in principle to join Symbian--with an offer to use Psion's operating system EPOC as the basis for smart phones. He offered a remarkable deal, taking only 31% of Symbian and selling the remainder to the three phone giants for $50 million. "Companies like Nokia and Ericsson are concerned about ending up like the manufacturers of personal computers, becoming box shifters for Microsoft," says Martin Butler, a British computer consultant. "Potter could become the Bill Gates of the portable-device marketplace. It's there waiting for him."