At a keynote at the 2011 Japanese Microsoft Developers Forum today, Microsoft Corp. (MSFT) CEO Steve Ballmer had exciting news for smartphone fans.  He announced some of the first known details about the company's next major release of its Windows Phone OS, Windows Phone 7.5.

I. Everybody Loves the Mango?

Mr. Ballmer says the upcoming OS, codenamed "Mango", is part of Microsoft's vision of "transforming the future of communications."

The chief executive admits that it's been a struggle over the last couple years for the prominent OS maker, but promises great things to come.  Mr. Ballmer comments, "We came to market with Windows Phone a year later than I wish we had, shame on us.  But we're moving forward very actively.  We launched Windows Phone last November, we've done a set of upgrades, we have a release that will come to market later this year in Japan.  Not only is it a release that is much more global, but we've added over 500 new features to Windows Phone."

"We have a big launch event to talk about the next release of Windows Phone tomorrow, so that information will be forthcoming, including some of the particulars about who is going to be building Windows Phones and which carriers are going to be offering them here in Japan."

Details about what "Mango" might hold haven't been specified, yet, but it's pretty easy to guess some of the items that may be on the menu.  Microsoft has long promised opening up multi-tasking for all third-party apps, pending a future update.  And Microsoft also promised connectivity with the popular Kinect motion sensor and Mobile Internet Explorer 9, a much-improved mobile browser.

Other improvements could be hardware dependent, such as Near Field Communications (NFC) technologies for wireless billing.  Rival Google Inc. (GOOG) has been pushing NFC particularly hard with its industry-leading Android platform.

Tie-ins with recent acquisition Skype, including video-chat services could be on the agenda, as well.

II. Windows Phone 7 Sees Poor Sales

Microsoft finds itself in a slightly curious position, in terms of sales.  On the one hand, its current sales are rather abysmal.  Of the approximately 100.8 million smart phones sold in Q1 2011, only 1.6 million were Windows Phone 7 handsets, according to a report by market research firm Gartner, Inc. (IT).

Microsoft is actually selling more Windows Mobile handsets than Windows Phone 7 handsets.  In Q1 2011 it sold 2.1 million Windows Mobile handsets, thanks to its drastically reduced prices on the phones, in an attempt to clear the way for Windows Phone 7.

On the other hand, the world's largest phone maker, Finland's Nokia Oyj. (NOK), has a deal with Microsoft to phase out Symbian OS and replace it with Windows Phone 7 over the next couple years.  If Microsoft can pull off a smooth transition, that move could catapult the company to second place in global phone sales, ahead of Apple, Inc. (AAPL).

Thus the future of Windows Phone 7 -- much like its upcoming update -- remains an enigma.