Microsoft Corp. agreed Monday to buy cell phone software maker Danger Inc., strengthening its position in consumer mobile phones and building its defenses against a major Google Inc. initiative.
The deal was announced as another, bigger attempt to stymie Google hit a roadblock. Yahoo Inc.'s board on Monday officially rejected Microsoft's multibillion dollar buyout offer, saying it undervalues the company.
Danger, a Palo Alto, Calif.-based company, builds Web browsing, messaging, social networking and other software for mobile devices. The vast majority of its revenue — $50.6 million in 2007 — comes from selling its technology to a single client — T-Mobile USA for its Sidekick phones, according to a filing with the Securities and Exchange Commission.
The companies did not disclose financial details of the deal.
Danger announced plans to go public in December 2007, shortly after Google revealed a new cell phone software package of its own called Android, backed by major phone manufacturers and wireless operators and freely available to programmers.
In a Silicon Valley twist, Danger was founded by Andy Rubin, who went on to start Android, which Google acquired in 2005.
Ramon Llamas, an analyst for the technology research group IDC, said the deal is interesting because Danger devices like T-Mobile's Sidekick and SunCom Wireless Inc.'s Hiptop are aimed at a new demographic for Microsoft's mobile efforts: instant-messaging-obsessed teens and 20-somethings.
Microsoft's purchase was one of a flurry of partnerships and ad deals unveiled Monday at the Mobile World Congress in Barcelona, Spain, which also included the unveiling of the first Sony Ericsson device to run Microsoft's Windows Mobile operating system.
"All these announcements are really supporting the strategy of moving beyond the business and personal productivity slots and into more of an entertainment" niche, said Pieter Knook, a senior vice president of the mobile communications business at Microsoft, in an interview last week.
Knook said Microsoft expects to nearly double sales of Windows Mobile licenses in 2008 to more than 20 million, from 11 million in 2007.
The company is fighting to gain a greater share of the smart phone operating system market. Worldwide, it lags Symbian, which powers all of Nokia Corp.'s smart phones, and open-source Linux systems that run many phones in Asia, according to IDC data.
In the U.S., Windows Mobile is No. 2 behind Research in Motion Inc.'s BlackBerry operating system, as of the end of the third quarter 2007.
Microsoft also hopes to snag more mobile advertising revenue, a nascent market expected to grow rapidly as the technology improves. The research firm eMarketer estimated U.S. mobile ad spending will rise to $4.8 billion in the U.S. alone in 2011.
Among the other announcements made Monday, Microsoft said Windows Mobile users can now download a test version of MSN Direct, an application that shows news, stock quotes and other content at a glance.
On the business side, the software maker revealed new customers for its PlayReady technology, which can deliver music, video, games and other content to mobile devices. Telefonica Espana and Omnifone will incorporate PlayReady, Microsoft said, and Telecom Italia is "exploring" it.
Microsoft also said it signed a handful of new mobile advertising deals with European publishers, and that Telefonica SA, which sells wireless access throughout Latin America, will offer subscribers access to Windows Live applications such as Hotmail on mobile phones.
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