Microsoft has acknowledged that Windows Mobile has not performed well, and said it is working on turning it around.
Windows Mobile lost market share this year, even though it managed to very slightly grow its unit volume, said Robbie Bach, president of Microsoft's entertainment and devices division.
He offered only a few subtle ways that the company hopes to improve its fortunes in mobile. "We have to do a better job executing and operating our business," Bach said. Part of that effort will include doing a better job integrating the Windows Mobile software with phone hardware, he said.
Despite some pressure from analysts to build its own phone hardware, Microsoft continues to stick with its current model.
"There's an opportunity for us to be a for-profit, software-only player," said Steve Ballmer, chief executive at Microsoft. "I think it's a winning approach, the right niche, the right way to get 50, 60 percent market share."
Bach said that his group has also been strengthening the Windows Mobile team by adding new "quality talent" from other groups that have successfully managed profitable businesses at Microsoft.
He also stressed that the group will need to continue to innovate the product. That will start with Windows Mobile 6.5, expected to appear on phones later this year. The newest operating system will offer a much improved browsing experience, he said.
"If I have a critique of the phones today, it's that the experiences are very good in the business case ... but if you have consumer scenarios like browsing, media, video, our experience isn't as rich as it needs to be," he said. With version 6.5 and beyond, users will find more of a focus on those types of capabilities, he said.
But in the context of increased competition in the mobile market, it's not clear if Microsoft will be making enough changes or if those changes will appear soon enough.
Some analysts seem to think Microsoft will need more dramatic changes. It would do well to make an acquisition that might help it quickly improve its standing, Matt Rosoff, an analyst at Directions on Microsoft, recently said.
Another analyst suggested a more dramatic move. "Microsoft would do better to focus on enhanced connectivity to its collaboration systems from all device types ... and abandon its desire to control the mobile OS -- a battle it cannot win," said Jack Gold of J. Gold Associates. "We expect Microsoft to ... exit the mobile OS space in the next one to two years."