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The tablet and netbook may not be threatening extinction for Microsoft in the portable client world just yet then, but the Windows giant still faces the prospect of phone-like gadgets – including smaller tablets – increasingly taking the place of notebooks. So it must get Windows (or, if it had more sense, a new OS) into a strong position on cellphones and new form factors. It won the netbook war, but has so far blundered around on tablets (insisting on Windows 7 rather than the more suitable WP7). And of course it has made multiple attacks on the smartphone OS, with limited success.

Its latest attempt, WP7, received strong developer and consumer response and brings the welcome relief of a user interface that is not designed to look like Apple's, but gives customers a choice of experience. However, it has a huge mountain to climb because of its poor reputation on handsets, and Android being at the peak of its popularity. Microsoft is tight-lipped about reports that early WP7 sales have been disappointing, but an executive admitted it would be a long process to make the new operating system a big hitter.

Arch-rival Google echoed that sentiment, as Android chief Andy Rubin patronisingly called WP7 a "good 1.0 product" (a double-edged compliment given Microsoft's famous reputation for getting things right only at release 3.0 or later).

Speaking at the All Things Digital: Dive into Mobile conference in San Francisco, Rubin said WP7 would find it very hard to catch up with Android and Apple iOS. "There's some stuff that's 20 years old in Windows Phone 7. You have this package of stuff that was invented before the internet. It gives us a speed advantage. We can adapt and be more agile," he said, as quoted by The Wall Street Journal.

At the same conference, Microsoft's VP for WP7 program management and design, Joe Belfiore, said that Android probably contains code that is also two decades old, because of its roots in Linux. He said: "It is true that we have a kernel that has been around for a long time. I don't think that's a bad thing."

However, he would not give any early sales figures for the WP7 handsets that launched recently, saying it was too soon to disclose sales. He denied that meant sales had been slow, but admitted that it could take "a couple of years" before WP7 gained significant market share. This would require a wider range of devices, some at lower price points. The WP7 app store now has about 3,500 products.

Developers have shown considerable interest in WP7 and feedback has often been positive, though many programmers believe it is still, in effect, a beta platform with problems to iron out. Microsoft and its handset partners have run major marketing campaigns in many territories, but one challenge is to get retailers and operators to give WP7 devices high prominence. Recently, UK vendor Carphone Warehouse was cold about WP7 sales, saying that HTC Android, iPhone and BlackBerry handsets were the hot items – but observers found virtually no WP7 products on display in Warehouse outlets.

Microsoft seems to realise it will have to move quickly to increase its share, and WP7 is already due for a new year update, according to sources. Chris Walshie, part of the team that created WP7's first jailbreaking tool, claims a "massive update" is due, sufficiently radical that the vendor "could have called it Windows Phone 8".

He said: "MS took three months to do what Apple did in three years." More sober forecasters tried to predict likely enhancements – copy and paste has already been promised, and as WPCentral speculates, there could be multitasking for third-party apps, turn-by-turn directions from Bing and custom ringer support.

Copyright © 2010, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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