With contacts on my iPhone how does Microsoft exchange work? I see there is an option in settings for Microsoft exchange info?
Your question doesn't really make any sense. If you have an Exchange account, yes, you can setup an account. If not, no you can't. What exactly are you trying to do, and maybe I can help you more.
I use an Exchange account I bought at 1and1.com and it only costs me $7.00a month. I love my Exchange account.
So you have two options, backup your phone before you blow it away, or sure, setup an exchange account, but you need to have an account on an exchange server in your office, and your work has to support active sync for it to work.
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You can setup a gmail account as an exchange account and sync your contacts with google. This is how I have my contacts setup.
You can also just sync your contacts in iTunes.
So I can put my gmail account in the Microsoft exchange settings?
And have mail off, contacts and calendars on?
In other words have 2 accounts under mail, contacts etc. Gmail account for mail and gmail account under ms exchange for contacts and calendars.
What happens when I add a contact manually with ms exchange?
Read this:
http://www.google.com/support/mobile/bin/answer.py?answer=138740
When you setup the exchange account and enable the contacts syncing, you'll have groups in your contacts - one will be phone contacts, one will be gmail contacts, etc... in the mail, contacts, calendar settings, scroll down to the "contacts" section and you'll see a "default account" option, select your gmail account and you'll sync new contacts as soon as they're created without any extra work.