Why on earth did Microsoft buy Danger Inc.???

Before I owned an iPhone, and a Nokia E61 before that, and a BlackBerry 7290 before THAT, I briefly owned a Danger HipTop on the FIDO network. I returned it and went with a BlackBerry mostly because of the sheer size of the HipTop. I just couldn’t justify carrying that brick around. If only it had been smaller, I might have kept it. I’ve long had a bit of a fascination with the HipTop series of devices from Danger, and they have improved on the size of their device over the years, but I don’t think the size improvements for the most part have kept up with the industry. They’re still fairly bulky.

That being said, they had a pretty decent hardware design concept, a very usable OS (although the interface was a tad childish for my taste) and a promising platform/application distribution strategy. But one thing they have never been is particularly successful in the overall handset market. So I’m a bit confused (and saddened) by this latest news that the Borg has gobbled up Danger, Inc.

“Sure, the folks in Redmond didn’t get their grubby mitts on Yahoo! (yet), but at least they picked up a little something for their mobile division, namely: Danger. According to news just crossing the wires, the monolithic company has picked up the Sidekick-creators for an undisclosed amount, and will subsequently fold the phone-maker into its mobile wing. Is there a Windows Mobile version of the Hiptop in our future? Survey says yes.”

There’s no doubt this has something to do with RIM and iPhone’s threat to Windows Mobile, as well as the impending Google Android threat, but at first glance, it’s difficult to understand what Danger might have to offer Microsoft.

Danger used to be a hardware designer, so Microsoft may be looking to enter the handset market with this purchase. But if they wanted a cool hardware design, they could have done better than Danger, who aren’t exactly selling HipTops by the truckload. Why not buy Motorola’s mobile business instead? Motorola is officially considering divesting itself of it’s mobile phone unit, after all. I don’t think this has to do with hardware though. For one, Danger has all but given up on the hardware, just one look at Danger’s website makes that imminently clear. Other than in a YouTube video, I can’t find pictures of their HipTop anywhere.

Microsoft also runs the risk of pissing off their existing Windows Mobile license owners. Something they can’t afford to do right now. They did that in the DAP market when they launched the Zune, which has failed to make any serious inroads against the iPod/iTunes juggernaut while at the same time weakening their existing PlaysForSure Certified for Windows Vista licensing effort (what was up with that rebranding move anyway?!?).

I also find it hard to believe that Microsoft sees any real value in Danger’s software, given that Microsoft has their own mobile phone OS. Microsoft has demonstrated long ago that it doesn’t need to pay for a good software idea, they can simply borrow it and make it their own. So what is it then?

I believe the answer to that question lies in these images from Danger’s website. One depicting the “Danger experience” and the other of their new business model:

These images depict a total solutions company. A company that can offer everyone in the ecosystem value, and more importantly provide a source of income from all levels. Microsoft’s current offerings only directly targets the OEM handset makers and the end users and completely leaves out the service providers, where most of the money is. Meanwhile, Microsoft’s two biggest competitors, RIM and Apple, have already figured out how to tap into the service provider revenue stream. RIM by providing the backbone service to it’s mobile email offering, and Apple by giving it’s partners a very compelling phone to lure subscribers with, as well as back-end services like the iTunes WiFi Store as well as email/information services through partnerships with other providers such as Google and Yahoo!.

Danger, once largely a handset OS/hardware company has already done all of the legwork to turn itself into an end-to-end solutions company. So by buying Danger, Microsoft acquires much of the knowledge, technology and relationships it needs to shift from being simply the maker/licensor of the Windows Mobile OS into a complete solutions provider in a bid to better position itself against the offerings of it’s competitors.

Overall, this seems like a smart move, but how easily it can be accomplished has yet to be seen. Danger’s technology has been about open standards and the use of Java. It’s no doubt going to take a lot of work to integrate it with Microsoft’s proprietary OS and APIs, but probably not as much work as trying to develop a similar solution from scratch, especially considering Microsoft is late to the party and was obviously completely unprepared to deal with not one, but two giants suddenly entering the market.

Unfortunately, there’s very little doubt that the current Danger mobile OS’s days are numbered, much to the sorrow of current HipTop/Sidekick fans. Less clear is the fate of the HipTop swivel screen form factor. Microsoft might choose to develop it further and use it to release it’s own handset (a.k.a., the Zune phone), or they might continue to license it out for others to build and brand as their own. What they choose to do really depends on how big the market is for the swivel device. Given that it wasn’t that wildly successful to begin with, Microsoft might just let it die a quiet death.

So HipTop/Sidekick fans, what’s worse? The form factor disappearing altogether, or living on it’s existance running the uninspiring Windows Mobile OS? Sound off in the comments or discuss it in the Art Of Geek forums!