• by Mark Walsh  @markfwal, October 11, 2010

Microsoft on Monday unveiled the first devices powered by Windows Phone 7, the long-awaited mobile operating system upgrade it is counting on to vault itself back into the high-stakes smartphone race against rivals like Apple and Google.

At a splashy launch event in New York, the company introduced nine new Windows Phone-based models from manufacturers including HTC, LG, Dell and Samsung due out for the holidays. The new phones will be available in Europe later this month and in the U.S. starting Nov. 8 from AT&T.

First announced earlier this year at the Mobile World Congress in February, Windows Phone 7 features "Live Tiles," or dynamic widgets, intended to organize Web content, applications and other data into subject-specific hubs to personalize and streamline interaction on the handset. The tiles update automatically with items like news alerts, appointments or the status of friends.

During the demo Monday, for instance, Microsoft Corporate VP Joe Belfiore showed how all a user's social networking contacts could be synced through the home screen's "People" hub, which gives prominence to Facebook. Other hubs cover areas like work, photos, games, music and video -- each featuring existing Microsoft properties such as Microsoft Office, Xbox Live, Bing and the Zune music service.

The aim is to let people quickly and easily find what they are looking for on the phone screen instead of having to navigate a grid of disparate apps as they might on other smartphones. "We think that very much, after this day, you'll agree that with Windows Phone we've built a different kind of a phone," said Microsoft CEO Steve Ballmer, in rolling out the first batch of Windows Phone 7 devices.

Whether consumers will agree and flock to Microsoft's new range of phones is the big question. Microsoft's legacy Windows Mobile platform has been losing market share steadily over the last several quarters to Google's surging Android operating system and Apple's iOS, which powers the iPhone and iPad.

Microsoft's share of the U.S. smartphone market for the three months ending in August had dropped from 13.2% to 10.8%, while Google's jumped from 13% to 19.6%, according to a comScore report released last week.

A recent Gartner report estimated that Microsoft's smartphone share in the last year would drop from 8.7% to 4.7%, with Android rocketing from 3.9% to 17.7%, and Apple increasing from 14.4% to 15.4%.

The research firm also doesn't expect Windows Phone 7 to reverse that trend, predicting that Microsoft's share will dwindle to 3.9% by 2014. IDC last month offered a less pessimistic outlook, projecting that "Windows Mobile" will increase share from 6.8% to 9.8%, ranking it fifth behind Symbian, BlackBerry, Android and iOS.

Fueled by Android's explosive growth, IDC overall predicts that smartphone units shipped globally will climb 55.4% this year to nearly 270 million compared to 173.5 million in 2009. One of the keys to Android's rapid ascent has been its proliferation across handsets from multiple manufacturers and carriers.

Microsoft appears to be emulating that open strategy by launching Windows Phone 7 on nine devices with more to come from the 60 operators in 30 countries the company says have committed to the new platform.

Along with AT&T, Microsoft has also signed up T-Mobile USA as an initial U.S. carrier partner for Windows Phone 7 devices. Verizon Wireless, which has a mobile search and advertising partnership with Microsoft, is expected to offer its own Windows Phone devices beginning next year.

AT&T will start with three models -- the entertainment-oriented HTC Surround (which also boasts its own kickstand), the Samsung Focus and the LG Quantum, which has a slide-out Qwerty keyboard. At the press event, AT&T Mobility head Ralph de la Vega said Windows Phone 7 would be "a cornerstone of our portfolio." With Verizon expected to get the iPhone starting next year, AT&T has reason to lessen its reliance on the Apple device by teaming with Microsoft. According to AT&T, the phones will cost customers $200 with a rebate.

Not surprisingly, Microsoft is throwing big dollars behind an ambitious ad campaign for Windows Phone 7, touting how the platform enables users to get information at a glance and go about their lives.

A teaser TV spot released online today shows people staring at their phones in a series of unlikely situations -- on a rollercoaster, while at a urinal, with their feet dangling in the water as a shark approaches -- and capped with a voiceover saying, "It's time for a phone to save us from our phones."

Early versions of some of the ads, created by Crispin Porter + Bogusky, had already leaked onto YouTube. But the total of eight spots will formally debut starting in Europe Oct. 12 and in the U.S. Oct. 25. "We're going to have the biggest TV marketing campaign in the history of the mobile business, with the ads running on shows such as 'Hawaii Five-0,' 'Bones' and 'Saturday Night Live,' as well as late-night talk shows," said Todd Peters, who leads Microsoft's mobile communications marketing group, in a company-posted Q&A online.

But advertising can only help so much. Microsoft's heavily promoted Kin smartphone -- launched earlier this year and aimed at teens and twentysomethings -- proved a huge failure, pulled after only two months on the market.