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TECHNOLOGY REPORTER

Fed up with watching as smart-phone makers grabbed the technology spotlight, PC manufacturers are striking back this week at the Mobile World Congress in Barcelona.

A handful of firms best known for laptops and personal computers - including Dell Inc. and Lenovo Group Ltd. - are expected to launch their own smart phones at the largest cellphone trade show of the year as they seek to emulate the successes of fellow PC vendors Apple Inc. and Hewlett-Packard Co.

With computer sales sliding and consumers paring back overall spending on electronics, PC makers are looking to the wireless industry as a way to create new revenue streams to help ride out the economic crisis and build new businesses to capitalize on the growing movement toward mobile computing on smaller devices.

Although Motorola Inc. and Nokia Corp. have been forced to trim staff and some analysts predict cellphone sales could drop by as much as 20 or 30 per cent in 2009, sales of smart phones, such as Research In Motion Ltd.'s BlackBerrys, are expected to rise as consumers trade up to devices that allow them to send e-mails and surf the Internet as their current wireless contracts expire.

"While the outlook for basic handsets is just as bleak as that for desktops and laptops, higher-end smart phones continue to hold promise," said Carmi Levy, an analyst at Toronto-based AR Communications. "PC vendors are simply going where the opportunity lies. ... It's fair to ask, however, whether they really understand what they're getting themselves into. Compared to the already-tumultuous PC market, the smart-phone market is like a shark-infested feeding frenzy. Most of them probably won't survive. And if they do, expect a lot of blood in the water."

The holiday quarter was the worst the PC industry has experienced since 2002, with computer sales slipping by half a percentage point, according to a study from U.S. technology research group IDC. Sales are expected to fall even further in 2009, with IDC predicting PC shipments to drop by as much as 5.3 per cent this year.

Although neither will be launching their own phones at the Barcelona show, technology titans Microsoft Corp. and Google Inc. will be around to lend a hand to device makers using their respective operating systems, Windows Mobile and Android.

Microsoft is hoping to leverage its existing relationships with PC makers to broaden the reach of Windows Mobile - a new version of which was unveiled yesterday - the way it did with the PC-based Windows operating system.

With Palm Inc. ditching its PalmOS operating system earlier this year, Microsoft finds itself as the maker of the last remaining proprietary operating system, while competitors such as Nokia's Symbian and Google's Android have gone to free open-source standards, said Chris Hazelton, an analyst who tracks the cellphone industry for 451 Group in Boston.

"It's harder now for Microsoft to justify that royalty payment when you have open-source alternatives," Mr. Hazelton said.

Apple will not be attending Mobile World Congress. Still, some of its competitors, namely Microsoft and Nokia, revealed plans for online marketplaces where users can purchase games and other software to customize their phones in an effort to counter Apple's App Store.

"While Apple will be absent from MWC, its presence will be felt, as competitors all announce improved app stores, interfaces, content relationships targeting Apple," RBC Dominion Securities analyst Mike Abramsky wrote in a research note Friday.

Dell's rumoured entry into the smart-phone market is expected to work with either Windows Mobile or Google's Android and will likely be positioned to take on Apple's iPhone.

Lenovo, the world's No. 4 PC maker, is still reeling after CEO William Amelio stepped down this month amid the firm's first quarterly loss in three years. Although the Chinese company has dabbled in the mobile space with a WiMAX-capable handset in the Russian market, it is hoping a device designed for European and North American consumers will fill the void left by weaker PC sales, Mr. Hazelton said.