Microsoft Surrenders Stake in Sendo as Companies Settle Suit

Microsoft and Sendo Holdings have settled a suit alleging Microsoft abused their partnership to develop a Windows-based cell phone by sharing the British company's "smart phone" technology with other handset makers. The settlement comes as the emergence of handsets with computer capabilities -- such as e-mail, Web browsing and entertainment -- develops into a key battleground for the industry.

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Microsoft Corp. and Sendo Holdings PLC have settled a suit alleging Microsoft abused their partnership to develop a Windows-based cell phone by sharing the British company’s “smart phone” technology with other handset makers. Microsoft will surrender its small stake in Sendo, reportedly 4 percent, under the deal announced Monday. Terms of the settlement, including any financial compensation, were not disclosed. The dispute began in late 2002 when Sendo scrapped plans to sell a hybrid between a cell phone and handheld organizer based on the Windows software platform from Microsoft. Instead, Sendo decided to develop a smart phone using the Symbian operating system with software developed for that platform by Nokia Corp., the lead investor in the Symbian consortium. Though smart phones now represent just a tiny fragment of the overall wireless market, the emergence of handsets with computer capabilities such as e-mail, Web browsing and entertainment is considered a key battleground for the industry. Microsoft and Sendo had begun developing the Z100 handset in 2001. Before that partnership unraveled, Cingular Wireless planned to introduce the device in 2002. Not long after switching to Symbian, Sendo filed suit against Microsoft alleging misappropriation of trade secrets, breach of contract, fraud and other claims. The suit, filed in U.S. District Court in Texarkana, Texas, also alleged that Microsoft’s software was repeatedly late and full of bugs, delaying the launch of the Z100 to the point that Sendo was struggling for cash and near bankruptcy. Microsoft Corp. rejected the charges it tried to “plunder” Sendo’s technology and share it with other manufacturers who could produce phones more cheaply. The software company also countersued for breach of contract, alleging that Sendo failed to meet its obligations to develop the Z100 according to an agreed-upon schedule. “We’re pleased with this resolution and look forward to continuing to collaborate with phone manufacturers to bring innovative products to mobile customers,” Microsoft deputy general counsel Tom Burt said of the settlement. Sendo’s group general counsel Robert Pocknell said the settlement will enable his company to focus on its future development and growth. Smart phones are expected to account for less than 3 percent of all wireless handsets shipped in 2004, or about 17.6 million of an estimated 650 million, according to research firm IDC. The number is expected to nearly double next year to about 30 million, or 4.3 percent of an estimated 700 million shipments. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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