Updated October 12, following the official launch: Microsoft Windows Phone 7 handsets in detail

Microsoft will unveil handsets running its new Windows Phone 7 (WP7) operating system for the first time today at an event in New York. Some experts predict this will be a make-or-break product launch.

Analysts say Microsoft's success with WP7 is important to its mobile initiatives, as well as to the overall future prowess of the software giant, which is best known for its desktop operating systems and office productivity software. Analysts regard the WP7 announcement as important to the entire company.

"On a scale of 1 to 10, this announcement is an 11," said Ramon Llamas, an IDC analyst. "This is where the rubber meets the road. It's huge."

Microsoft must prove it has overcome its dismal performance with the current Windows Mobile OS and the failure of a youth-focused Kin phone line that launched in the spring but was killed two months later.

More daunting is how well WP7 can distinguish itself with consumers against Apple's iPhone and an array of Android devices, as well as the persistence of Research in Motion's BlackBerry smartphones with the corporate crowd.

"With WP7, Microsoft is trying to catch up to everyone else in mobile," said Zeus Kerravala, an analyst at Yankee Group. "In many ways, I think they've missed the mobile window, not to play with words. Windows Mobile has left a bad taste in people's mouths and now, trying to get customers to try Microsoft and WP7 again will be difficult, especially with the popularity of Android and Apple."

Microsoft needs to replace those failed products with a "cool and sleek" set of WP7 devices that will "draw people in", Llamas said.

Windows Phone 7 handset line-up

Microsoft is being quiet about the final lineup of devices that will be shown, although a spokeswoman said there will be devices - plural - shown by Microsoft with US carrier AT&T, after a press conference with Microsoft CEO Steve Ballmer and AT&T Mobility President Ralph de la Vega. And Microsoft has not restricted itself to smartphones; some observers expect more news on Microsoft's plans for tablet computers. in the UK, all five major mobile networks - 3, Orange, O2, T-mobile and Vodafone - have announced they will stock handsets running Microsoft Windows Phone 7.

Device makers HTC, LG and Samsung are expected to show off their new products at the launch event. Plenty of YouTube videos have been generated showing the distinctive 'hubs' and 'tiles' motif that will be used to distinguish WP7 from other interfaces. One video shows the incorporation of five popular apps: Netflix, Twitter, Flixster, OpenTable and Travelocity. Another video, that shows HTC's 3D customisation of WP7, has received more than 400,000 hits on YouTube.

Developers, so far, have downloaded more than 300,000 copies of tools to help them build applications. Experts noted that the applications already written for the existing Windows Mobile OS must be heavily rewritten for WP7, and some developers are unhappy about that. While some large third-party development houses, such as Travelocity, will build applications for WP7 phones, it's less clear whether small development shops will be able to handle the development process.

"The jury's out," said Paul Reddick, CEO of Handmark, a mobile application developer who commented this week at CTIA in San Francisco. "Coming out of this economy, developers don't randomly build stuff."

Next page: Apps for Windows Phone 7, and battling Apple and Android >>

Microsoft will unveil handsets running its new Windows Phone 7 operating system for the first time today at an event in New York.

There's an app for that?

Microsoft is not saying how many applications will be available to WP7 through its online Windows Phone Marketplace. The question is an important one, since too few could spell disaster, Llamas said, pointing out that the Palm Pre launched in 2009 with only 32 applications.

"Microsoft deserves congratulations for 300,000 downloads of the developer tools, but I would hope they have more than the 32 apps that Palm Pre had," Llamas said. "They need a goodly number, although I don't expect 100,000."

The biggest concern for WP7 has a lot to do with marketing and convincing buyers that it can be distinctly different from the iPhone or Android devices, Llamas said.

Most of the preview videos of the interface show that WP7 is cleaner, but buyers will also note that WP7 offers a touchscreen of about the same size as an iPhone, with a virtual keyboard that could well be an iPhone's.

The hubs and tiles concept could resonate well as a way to present access to pertinent information right from the home screen, analysts have noted. (The tiles are actually running with real-time information on a home screen, without the need to open a full application, for example.)

Llamas also said that Microsoft will benefit from having its installed corporate base from the Windows desktop and Windows Mobile. That will include WP7's allowing access to corporate email through Exchange and a variety of security protections.

Still, there appear to be many things about WP7 that are similar to other smartphones. "How is WP7 differentiated from Apple and Android and BlackBerry?" Llamas asked. "What space is Microsoft carving out? That is the multibillion-dollar question for Microsoft."

What are WP7's chances of success?

Today, the Windows Mobile OS gives Microsoft a 6.8 percent share of the global market for smartphones, a share that IDC expects will rise to 9.8 percent by the end of 2014 with WP7 and future generations.

That will put Microsoft in fifth place in 2014, which might sound unimpressive except that smartphones sold by all vendors will double in number, exceeding more than 500 million in four years, Llamas said. Gartner has been more pessimistic about Windows Phone's success, saying it will only command 3.9 percent of the market by 2014.

"What will constitute success for WP7?" Llamas asked. "Would it be a million sold in three days like Apple? No. Will WP7 turn heads? Yes, I think so. But this is not going to be an overnight sensation. It will take a lot of seeding and grooming by Microsoft,so look for them to do a very convincing marketing campaign. Marketing really matters at this point."

See also: Windows Phone 7 handsets won't support tethering

Microsoft: No Windows Phone 7 for tablets

Video: Microsoft unveils Windows Phone 7 handsets