Full coverage of the Mobile World Congress in Barcelona

Microsoft has teamed up with Sony Ericsson to create the first Sony phone, which, in using the Windows operating system, gives a sign of Microsoft's increasingly aggressive attempts to muscle in on the growing "smartphone" market.

The Xperia X1 will go on sale in the second half of the year and represents an attempt by Sony Ericsson to catch up with other handset makers, which have traditionally been stronger at producing phones that blend calling with internet and other computer-like capabilities.

It will also mark the first time that Sony Ericsson has used Microsoft's Windows operating system, in a departure from its traditional partnership with Symbian, the operating system it partly owns and which famously powers Nokia handsets.

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The phone, which features an arc-like sliding mechanism, has a three-inch display and a touch-screen interface based on nine interchangeable "panels" that is more than a little reminscient of Apple's iPhone. Pricing details were not disclosed.

Sony Ericsson executives said that the focus had been on the "user experience" and not the operating system, but the partnership is significant — especially seeing as Microsoft can now boast a presence in the phones of the five largest handset makers, including Motorola, Samsung and Nokia, the market leader.

Microsoft will be aware that the first phones which feature the Google-backed Android operating system are also due out in the second half of this year.

It is, therefore, keen to stamp its mark on the smartphone operating system market before Google's system takes hold.

As the provider of the operating system, Microsoft will also in turn be in a good position to offer web-based services such as e-mail and search, which are expected to grow enormously as network speeds increase and the experience of using the internet on mobile phones improves.

Motorola, Samsung and HTC, the Taiwanese manufacturer, have all said that they will produce phones that run on the Google-backed operating system.

Microsoft has said that it expects 20 million phones loaded with its Windows Mobile operating system will be sold in the fiscal year to June 30, but the entry of Apple's iPhone to the market last year shows just how much pressure existing handset makers and software providers have come under.

According to research published last week, in only two quarters the iPhone shot Apple into third place in the global smartphone market with a 6.5 per cent share, behind RIM, which makes Blackberry, on 11.4 per cent, and Nokia, the leader, on 52.9 per cent.

In the US, Apple took a 28 per cent share, behind the market leader RIM, but ahead of all the devices that use Windows Mobile combined.

Among them, smartphones using the Microsoft operating system had only a 21 per cent share in the US, the research, by Canalys, suggested.

Overall, smartphone shipments rose worldwide by 60 per cent to 115 million in 2007.

Microsoft's announcement comes as more than 50,000 executives from the mobile industry gather in Barcelona to discuss the latest developments in wireless devices and networks at the annual Mobile World Congress.

Topics expected to be high on the agenda include the growth of "location-based" services, the uptake of web-based services, such as music downloads and social networking on mobiles, and "femtocells", pockets of wireless connectivity in the home that ease strain on the traditional phone network by routing calls over a broadband connection.

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