Microsoft to buy phone maker Danger

The previous generation Hiptop 2

Microsoft apparently is serious about the consumer mobile phone business.

The software giant said Monday that it's acquiring Danger, the Palo Alto, Calif.-based maker of the T-Mobile Sidekick for an undisclosed amount.

"The addition of Danger serves as a perfect complement to our existing software and services, and also strengthens our dedication to improving mobile experiences centered around individuals and what they like," Microsoft entertainment unit President Robbie Bach said in a statement.

Danger's Sidekick brings many of the same abilities as business-oriented smartphones--Web browsing, e-mail, and instant messaging--but it does so in a way that has been more popular with executives' kids than with businesspeople themselves.

The challenge for Microsoft, though, is that Danger has its own operating system, distinct from Windows Mobile, as well as completely different way of doing business than Microsoft.

Although both companies use others to manufacture their devices, Danger gets its money primarily by getting a cut of the monthly service for its phones, while Microsoft gets its money licensing the operating system to phone makers.

On the plus side, Danger actually is agreeing to be bought by Microsoft, unlike Yahoo, which formally rebuffed Microsoft's bid Monday.

Microsoft's acquisition brings a halt to Danger's plans to go public. In December, the privately held company had filed its preliminary paperwork for an initial public offering.

Danger was started by Andy Rubin, who later left the company to launch another mobile start-up, which was acquired by Google. Since then, Rubin has been leading the development of Google's Android open-source mobile platform, which is gaining attention at the Mobile World Congress in Barcelona, Spain, this week.

Danger's two other co-founders, Matt Hershenson and Joe Britt, have remained at the company, heading its technical teams. Britt has prior experience of being gobbled by Microsoft, having been at WebTV when Microsoft bought that company. Danger has 294 workers in total, according to the company.

Update: In a telephone interview, Microsoft General Manager Scott Horn said the company isn't ready to announce its specific plans for Danger, but said the company plans to continue operating its existing Sidekick business.

Horn said Microsoft has already spoken with Motorola and Sharp, the two companies that make phones for Danger. Both, he noted, already also make Windows Mobile phones.

Although Danger's business model is different from Windows Mobile, Horn said that Microsoft already licenses some of its mobile Windows Live software for a monthly fee.

Horn said Microsoft will look at ways of bringing the two businesses--and the two operating systems--more closely together.