Microsoft has a profitable business building software for the Mac; now it has an eye on the iPhone, too. Image: Apple

Tom Gibbons, head of Microsoft’s Specialized Devices and Applications Group, said the focus would be on extending Office functions onto the iPhone and iPod touch. Image: Microsoft

Don’t think for a minute that Microsoft is ignoring the iPhone. In fact, the software giant is probing the gadget for profit opportunities.

For a little more than a week, a team of the company’s Silicon Valley software engineers has been examining the iPhone software development kit (SDK for short), a set of tools Apple (AAPL) released this month that let outsiders build software for the iPhone and the iPod touch. Microsoft (MSFT) executives aren’t sure yet whether they’ll find worthwhile opportunities to sell iPhone software – but they seem eager to find out.

“It’s really important for us to understand what we can bring to the iPhone,” Tom Gibbons, corporate vice president of Microsoft’s Specialized Devices and Applications Group, told Fortune on Monday. “To the extent that Mac Office customers have functionality that they need in that environment, we’re actually in the process of trying to understand that now.”

Though it’s typical to think of Apple and Microsoft as pure software rivals, their relationship is actually more complicated. For more than a decade, Microsoft has maintained a group of engineers whose sole job is to develop software for Apple’s Macintosh operating systems. Most of the engineers in Microsoft’s Mac Business Unit are based in Mountain View, Calif., a few miles from Apple’s headquarters. (They also happen to be quite close to the headquarters of archrival Google (GOOG).)

The Mac unit’s work certainly isn’t charity – it delivers millions of dollars in profit for the company with its Mac version of the Office productivity suite. Microsoft doesn’t break out exact numbers, but we can extrapolate: Gibbons said the Mac Business Unit provides about a third of the revenue for the Specialized Devices and Applications Group, which also includes Windows Embedded, Microsoft Hardware, the Automotive Business Unit and Microsoft Surface Computing; the whole group did more than $1 billion in sales last year. So it’s reasonable to guess that the Mac unit provided about $350 million – and since Gibbons said the Mac group was one of the group’s more profitable units, it’s possible that Microsoft made somewhere in the neighborhood of $200 million in profit from Mac software.

With the addition of Microsoft Exchange, the iPhone is open for business. Image: Apple

Steve Jobs sent a clear message to the technology world Thursday: Apple wants it to view the iPhone as an opportunity, not a threat.

To drive that point home, Jobs gave up the stage for most of Apple’s (AAPL) highly anticipated software event at its Cupertino headquarters. Rather than hog the spotlight with his legendary presentation skills and personality, he let deputies and partners explain how entrepreneurs can start writing their own software for the iPhone, and how businesses can use the device to seamlessly access corporate e-mail.

Journalists and others wait for the iPhone SDK event to begin. Image: Jon Fortt

Refresh this page for updates.

Apple (AAPL) this morning is announcing details about how it will open the iPhone and iPod touch to outside developers. The company has also promised new details about how enterprises can take advantage of the iPhone, putting it in more direct competition with Research in Motion’s (RIMM) BlackBerry and Microsoft’s (MSFT) Windows Mobile devices.

The event has not yet begun.

Steve Jobs has taken the stage.

By Jon Fortt and Michal Lev-Ram

Will Apple give up some control over the iPhone in order to court corporate customers?

That’s one of the juiciest questions surrounding a gathering on Apple’s (AAPL) campus Thursday, where CEO Steve Jobs has promised to open up the iPhone’s software secrets to the world for the first time. Apple’s invitation to the event also hinted at new business-friendly features for the device, and Silicon Valley is abuzz about what that could mean. Will the BlackBerry-toting masses be able to trade in the company smartphone for an iPhone?

Online software may be the future of computing – but the truth is, it’s far from perfect.

• February 12: Research in Motion’s BlackBerry e-mail service goes on the blink for three hours, and slows again a week later.
• February 15: Problems with Amazon Web Services’ S3 online storage service takes several sites down for two hours.
• February 24: Google’s YouTube video service is knocked offline.
• February 26: Some customers of Microsoft’s Hotmail e-mail have their service unavailable for several hours.
  Continue Reading: “‘Cloud’ computing’s reliability gap”

Image: Apple

Can Apple regain its status as a Wall Street darling?

So far 2008 has not been kind to the technology trendsetter. With U.S. iPod sales slowing and iPhone hype fading, investors have been seized by worries that the crew in Cupertino isn’t much of a growth story anymore. The stock has fallen 40 percent from its recent highs, losing some $50 billion in market value –and it isn’t clear what could turn things around.

It does seem certain that major relief won’t come from Apple’s (AAPL) newest products. This week’s update of the MacBook laptop line adds speed and memory, but no breathtaking design touches. The super-slim but pricey MacBook Air laptop that CEO Steve Jobs unveiled in January has met with mixed reviews, and won’t provide enough of a boost to make up for the iPod slowdown. And Apple TV, the second incarnation of Apple’s failed attempt to bring digital downloads to the television, doesn’t seem to be attracting an iPod-like following either; on Amazon (AMZN), it’s about as popular as a niche backup hard drive.

So where will Apple go for a sales boost to lift its stock? Perhaps overseas.

Even as U.S. tech spending slows, the market for high-tech gear and the opportunity for Apple to grow, is rapidly expanding in Europe and Asia. To wit: Hewlett-Packard (HPQ) CEO Mark Hurd noted last week that emerging markets accounted for nearly half of the industry’s PC shipments at the end of 2007, and well over half of the growth.

Apple reported earnings that beat analyst estimates on strong sales of iMacs, laptops and iPhones. But its cautious outlook led investors to slam the stock Wednesday morning, and take much of the Nasdaq down with it.

Why?

A moody market braces for a big earnings week. How ugly will it get?

It’s time to face the music.

When leading tech companies offer their earnings numbers this week, Wall Street’s focus won’t be on how healthy their overseas businesses are, or how strong sales were during the holiday season. Instead, with global financial markets in turmoil, analysts will be sensitive to hints that executives are losing their sunny optimism.

Flash-based laptops? Suped-up iPhones? The wait is over for Apple’s biggest announcements of the year.

The crowd at Macworld 2008 settles in for the Steve Jobs keynote. Photo: Jon Fortt

SAN FRANCISCO — The keynote has begun. There’s a Mac vs. PC commercial showing. PC is talking about what a bad year 2007 was, with all of Apple’s announcements including the iPhone. PC says 2008, though, will be a great year. “What are you going to do?” Mac asks. “I’m just going to copy everything you did in 2007.”

Steve Jobs walks onstage from the left.

Trying to pick the winners in ‘08? Watch these three conferences.

In January, politics has Iowa, New Hampshire and South Carolina. Tech has DEMO, Macworld and the Consumer Electronics Show.

Just as primaries and caucuses define the year’s political landscape, these three big technology trade shows compete to introduce trends that will shape 2008. Each show has its own personality and its own surprises – and its own part in influencing whether a few months from now we’re all clamoring for new iPhones, wireless HD home theaters, or the next challenger to Facebook.