There's a saying "Keeping up with the Joneses" which goes back to the early 1900's (thanks Wikipedia). It basically has to do with people needing to keep up with the neighbors (in this case, the generic Joneses). I feel like Microsoft has this same symptom at points.
According to recent numbers, Microsoft Windows Mobile was only on 2.8% of cell phones, according to Gartner Research. Compare this with 36.6% for the open-source Symbian OS, 25.5% for the Android OS, 16.7% for iPhone OS, and 14.8% for the Blackberry OS. In other words, Microsoft Windows Mobile just is not cutting it.
Since Microsoft needs to keep up with the Jobses (Steve Jobs is often considered the Face of Apple), Microsoft released Windows Phone 7 last month. Microsoft basically redesigned the operating system, because as we see it wasn't working. According to USA Today, the first phone to run this OS is the Samsung Focus through AT&T, which was released on November 8.
According to cNet reviews, Microsoft does seem to have done a nice job on the operating system, but as they point out, it is an uphill battle to overtake some of the companies above them on the list. One interesting feature that jumped out from the review (since I haven't used it myself yet) was the integration with Xbox Live. That could be something that sets this phone apart, if it gives people access to their games and accounts in a mobile fashion.
We'll see how it shakes out, but Microsoft does have a long way to go.
Thanks to Kevin for the heads-up!