Microsoft (NASDAQ: MSFT) may be late to launch a line of smartphones with its Windows 7 Mobile OS, but it plans to make up for that with a major foray into the business.

The world’s largest software company will go to market with Windows-powered phones on October 11.

The Wall Street Journal reports that the first smartphones which will use Microsoft’s software will be built by HTC, Samsung, and LG Electronics. The phones will operate exclusively on the AT&T (NYSE: T) Wireless network.

Microsoft’s mobile business has been such a failure that it now has less than 10% of the smartphone OS market in the US.  Google (NASDAQ: GOOG) has 20% of the market even though its Android system is only three years old. Apple (NASDAQ: AAPL) and Research In Motion (NASDAQ: RIMM) dominate the balance of the business with their iPhone and BlackBerry products.

Microsoft and its CEO Steve Ballmer have been willing and able to invest billions of dollars to move into markets that they hope to dominate. That has brought them failure in the multimedia player market, and only partial success in the search business. But, it has allowed them to overcome the huge advantage that Sony (NYSE: SNE) had in the game console business. It has also placed the company in a position where it will probably earn a large part of the cloud computing and virtualization markets.

Microsoft may have already decided that it cannot afford to lose the mobile OS war without a compromise to its future. The internet has moved to the wireless market. That means e-commerce, search, and software development will follow.

Microsoft’s desperation could be its largest asset. Applications developers will have to be compensated for their work, which is something that Apple does not have to do. Handset companies will have to be compensated, probably for some of their manufacturing, marketing, and developing costs. Microsoft has the balance sheet to do those things. But, does it have the will? It will have to unless Ballmer is prepared to give up on much of his company’s future.

Douglas A. McIntyre

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