By Michal Lev-Ram

LAS VEGAS — While Apple’s iPhone wants to attract business users, Microsoft is desperately trying to move away from its “all work and no play” image.

On Tuesday the Redmond-based company unveiled an updated version of its mobile operating system that it hopes will make it more attractive to everyday consumers. Among the new “consumer-friendly” features on Windows Mobile 6.1 is easier navigation capabilities, an enhanced Internet Explorer mobile browser that lets users zoom in and out of pages and “threaded” text messages (which means users can keep track of texts to and from a particular contact like a chat conversation, a feature operating systems like the Palm OS have had for years).

Microsoft (MSFT) says it is determined to become the operating system of choice for both work and play. Its new Windows Mobile takes a few steps in the right direction, but it will take a lot more than a handful of minor upgrades for the company to change its all-business image. Unlike Apple’s (AAPL) iPhone, which is known as a consumer and entertainment-driven device, Windows Mobile phones have traditionally been geared for the corporate world.

Speaking at the CTIA wireless trade show in Las Vegas on Tuesday, Robert Bach, president of Microsoft’s entertainment and devices division, said he thinks that the company’s reputation as a “mobile solution for people at work” is changing.

The software giant’s Windows Mobile platform already powers a variety of smartphones like the Motorola (MOT) Q and Samsung’s Blackjack, and is on track to sell 20 million devices running on its operating system this year, according to the company. But using most of these phones feels more like using a mini version of Windows on a PC than playing around with an iPhone, the new poster child for consumer-centric cell phones.

Microsoft is making some headway into the non-business market, though it’s unclear whether this is a direct result of changes to its own software.

For the first time, music-phone maker Sony Ericsson is coming out with a Windows Mobile device. The new Sony phone has a much slicker look and feel than most Microsoft devices, but that’s because its Xperia X1 has a software “layer” that runs on top of Windows Mobile and allows for nine customizable panels to appear on the home screen, similar to the small icons on the iPhone interface. The upcoming smartphone, which won’t be in stores until the second half of 2008, is also a touchscreen device — a category that has been a big hit among consumers since Apple’s iPhone came out last year.

Microsoft is making other advances on the consumer front. The company recently bought Palo Alto, Calif.-based Danger, maker of the consumer-friendly Sidekick, which is sold by T-Mobile. But it’s not yet clear how the acquisition will play into Microsoft’s overall mobile strategy.

Of course, Apple has its own challenges convincing IT managers that its device is secure and practical enough for the corporate world. Which raises the question: Can one phone be all things to all people?

Microsoft seems to think so. Unlike Apple, its operating system runs on a variety of phones made by a variety of manufacturers, though currently most of these phones fit into the same business category. If the company wants to become all things to all users — if that’s even possible — than it will likely take more than new zooming features on its mobile Internet browser.

By Michal Lev-Ram

Is Motorola really considering getting rid of its cell phone business? Don’t count on it — at least not anytime soon. Despite mounting pressure from activist investor Carl Icahn to sell or spin off the money-losing division, the company still seems convinced it can revive the once high-flying division.

Since January, when it issued a vaguely-worded statement that it would explore “the structural and strategic realignment of its businesses,” Motorola has been been signaling it intends to hold on to the handset unit.

Case in point: At a recent Morgan Stanley technology conference, Motorola (MOT) chief executive Greg Brown said the key to a turnaround will be led by a new and improved lineup of phones.

“At the end of the day, I think that the recovery of that business will be primarily product portfolio led,” Brown said, adding that he is focused on bringing out a wide range of new devices across “different technologies, geographies, price points and tiers.”

Brown also told his audience that he is actively searching for an executive to run the company’s mobile devices business. “We want someone steeped with experience, ideally having some technology familiarity or orientation,” he said.

Brown himself has been running the handset unit since early February. The CEO says he now spends about 80% of his time on the division, which posted a fourth-quarter operating loss of $388 million in January

Some industry insiders say they’re not surprised.

“Their message has consistently been that they were going to fix it themselves,” says Robert Laikin, CEO of cell phone distributor Brightpoint (CELL). “I never thought they were going to sell it.”

Others say Motorola tried selling its mobile devices unit but couldn’t find any takers. According to recent reports, both LG and Sony Ericsson have said they are not interested in buying the cell phone business.

In the meantime, Icahn raised his stake in Motorola to 6.3%, up from 5%. Gearing up for the company’s annual shareholder meeting in May, Icahn is pushing to put four favored executives on the phonemaker’s board, including Keith Meister, who manages the shareholder’s various businesses. Icahn has said his proposed directors will “assist Motorola” in executing the company’s “long over due decision regarding the separation of its mobile devices business.”

Motorola has asked its shareholders to reject Icahn’s nominees. A company spokesperson also said Motorola continues to evaluate its options in regard to the cell phone business.

It’s clear Brown is trying to buy more time to clean up the mess himself. If the company’s mobile division is able to show signs of improvement, that will make it more attractive to potential buyers or partners. Then again, if Brown manages to revive the cell phone unit business himself, why he would want to get sell off his fixer-upper is finally starting to show signs of life again?

Either way, Motorola’s CEO acknowledges it could take into 2009 for the company to get back on track. By then, other phonemakers — including Nokia (NOK), Samsung, Sony Ericsson and LG — could continue to eat away at what’s left of Motorola’s worldwide and U.S. market share. As for Icahn, you can bet he’ll keep agitating.

By Michal Lev-Ram

Last year Samsung overtook Motorola (MOT) as the second-largest phone manufacturer. Now, the flailing Razr-maker risks ceding third place to Sony Ericsson. Ouch.

On Wednesday morning, Motorola released yet another round of disappointing earnings — profit from continuing operations fell to $111 million from the year-ago $523 million, as handset sales plunged 38 percent. Motorola shares quickly fell and were down more than 17 percent by late morning.

In his first earnings report as acting CEO, Motorola’s Greg Brown told analysts that the mobile devices unit “remains challenged.” What’s more, Brown warned it would likely be into 2009 before Motorola has a “robust and competitive portfolio.”

Enter Sony Ericsson, the No. 4 handset manufacturer.

The London-based joint venture between Japan’s Sony (SNE) and Sweden’s Ericsson (ERIC) hasn’t exactly been showing explosive growth, but it has been steadily advancing: Just last week the company announced it had increased its year-over-year handset shipments by 18 percent. And, while Sony Ericsson’s profit declined — fourth quarter 2007 net income was about $541 million, down from $648 million last year — the drop was due mostly to new, lower-priced handsets in its product portfolio.

Bottom line, if Motorola keeps stumbling and Sony Ericsson marches on, their market positions could soon be reversed. “If Motorola doesn’t bring something entirely new by 2009, you will probably see the switch happening by then,” says Ping Zhao, a telecom analyst with Credit Sights.

Sony Ericsson’s global market share stood at 8.8 percent in the third quarter of 2007, according to technology research firm iSuppli. At the same time, Motorola’s market share slid to 12.7 percent (considerably down from its Q4 2006 height of 22.6 percent). If Sony Ericsson’s plan to make an aggressive push into the United States is successful, it will likely snag even more market share from Motorola, especially considering its multimedia device lineup — much of which is not yet available in the United States — is superior.

Sony Ericsson’s new president, Hideki Komiyama, has publicly said his company’s target is to become one of the top three players in the industry. At the Consumer Electronics Show in Las Vegas earlier this month, Komiyama said he plans to introduce the widest range yet of Sony Ericsson phones in the United States this year. “This is the year for the U.S. market,” Komiyama said in an interview on the show floor in early January.

Sony Ericsson’s multimedia phones — mainly its Cybershot camera phones and Walkman music devices — are already popular overseas. But because the company makes GSM devices, it has yet to make a dent in the CDMA-heavy U.S. market. The new phones it plans to introduce later this year will be optimized for U.S. networks. The company also said it plans to launch a music phone campaign this summer and push its Cybershot phones in the 2008 holiday season.

Motorola also unveiled several new multimedia devices at CES — including the video-centric Moto Z10 and the Rokr E8 music phone — but Credit Sight’s Zhao was unimpressed.

“We haven’t seen some brand new ideas out of that company for a while,” says Zhao. “My opinion is that the company will continue to lose market share through 2008 — there’s no new product to drag them out of not losing market share.”