• by Mark Walsh  @markfwal, May 23, 2011

Whatever new features Microsoft unveils tomorrow at its event announcing the updated version of Windows Phone 7, it's hard to imagine they'll have a major impact on sales. After all, Windows Phone 7 itself was supposed to be the big improvement on the Windows Mobile platform. And so far it's been a dud.

During the first quarter, only 1.6 million of the 100 million smartphones sold worldwide was a Windows Phone 7 device, according to Gartner data released last week. Compare that to more than 36 million Android devices and nearly 18 million iPhones.

And according to comScore, Microsoft continued to lose ground in the U.S. smartphone market, dropping almost a point to 7.5% in the first quarter compared to the prior quarter. In the same period, Android picked up another six points to claim a 34.7% share. In short, even with the overhaul of its mobile operating system and the marketing blitz attending the launch of Windows Phone 7 last fall, Microsoft is still heading in the wrong direction in the smartphone race.

What's the company's response? Speaking at the Japanese Microsoft Developers Forum Monday, CEO Steve Ballmer told the audience the latest Windows Phone version -- codenamed "Mango" -- will pack some 500 new features. Unless one of them involves Microsoft automatically subsidizing users' wireless bills, don't hold your breath in anticipation.

According to prior reports, the update will add new wrinkles like Bing Audio, for identifying songs playing nearby, and Bing Vision, for scanning barcodes and capturing visual data for searches. I wonder if new WP7 phones will come with 3D glasses? Might help. But the only thing likely to boost Microsoft's smartphone fortunes is its alliance with Nokia, which will lead to the Finnish phone giant phasing out Symbian in favor of WP7 as its primary smartphone platform.

Nokia phones running WP7 aren't expected to hit the market in a big way until next year, although there's speculation Nokia CEO Stephen Elop could show up at the Microsoft event to preview the first devices resulting from the two companies' partnership.

The sooner they're in stores globally, likely the better for Microsoft. With Nokia's huge existing customer base, the research firm projects Windows Phone will become the second largest smartphone platform after Android by 2015, with 19% share. But with Nokia steadily losing share in the smartphone market, it's also not guaranteed the two companies will be able to cure each other's mobile woes.