The picture became increasingly dismal for Microsoft over the course of 2009, though.  According to market research firm Gartner, Windows Mobile's marketshare now stands at 7.9 percent.  Apparently its competitors ate its lunch as Apple's (OS X) share rose to 17.1 percent and RIM also grew significantly, now at 20.8 percent.

That's disappointing considering that Microsoft was one of the first players to enter the market with its Windows CE, released in 1996, which went on to form the foundation Windows Mobile.  One of the main problems has been the iPhone, which launched in the summer of 2007 and has since seen two compelling hardware updates, the first bumping it up to 3G and the second delivering a faster processor.  States Ross Rubin, an NPD Group consumer technology analyst, "It was really the iPhone that came out full-bore for a consumer perspective.  We saw app development focus on consumer applications like social networking and games.... Particularly with Apple's retail presence and advantages in that market, through design and so forth, that's where Microsoft's main challenge lies."

Raven Zachary, a technology analyst and owner of iPhone app development house Small Society comments on Microsoft's missed opportunity in the smartphone market, "It was theirs to lose and they lost it. They had everything they needed to execute, to do the right kinds of carrier deals to create an app store, create visual voice mail, touchscreens and so on. They've been in this space since the beginning."

One problem has been the segmented hardware.  RIM doesn't overly rely on media to sell; rather it sells itself with a strong suite of proprietary business tools.  Apple, meanwhile has a single basic hardware design (with some variations between its three generations) allowing an App to easily work on any of its phones.  Windows Mobile phones, however, include handsets from HTC, LG, Samsung, and others -- in other words developers have to deal with the headache of creating multiple versions of a single app to reach the entire audience.  At least Microsoft is not alone in this plight -- segmentation has also become an emerging problem for Google's Android OS.

Another problem has been the slow pace of updates.  With the launch of Windows 7, many heard that Windows Mobile 7 was soon forthcoming.  However, Microsoft instead released Windows Mobile 6.5, a stopgap solution. Windows Mobile 7, codenamed "Photon", has been bumped back to 2010.  That delay has caused many buyers to simply not upgrade -- or more likely, pick a Blackberry or iPhone instead.

Microsoft isn't out of the game just yet.  Just as Apple looked to be on its way out of the PC market, but managed a turnaround, Microsoft still can hope to right the ship and dig out a nice niche of marketshare for itself.  Forthcoming proprietary phones may play an important role in that.  However, the trouble signs remain for Microsoft and if doesn't take strong action, it risks losing OS war for good -- in the smartphone market.