Microsoft will launch a new generation of its Pocket PC and Smartphone platforms this year, the company announced at the Mobility Developer Conference in Paris.

It handed attendees software development kits for the new Pocket PC, codenamed Ozone, and referred to the new Smartphone as 'v.Next'.

Microsoft arrived late to the world of mobile devices and, while it has carved out some PDA market share with Pocket PC, it faces a huge task in establishing the Windows-powered Smartphone.

Unfortunately for Microsoft, the market for mobile phones is larger than that for PDAs, and the two dominant handset vendors, Nokia and Ericsson, appear set against using its software.

With other leading vendors, they share ownership of the rival Symbian OS; Sun's Java is also widely deployed. But there is lively developer interest in Microsoft's mobility platform.

Attendance at the conference, held with Microsoft partners like HP and Orange, was 35 per cent up on last year. So what's the attraction?

Both the Smartphone and Pocket PC use versions of Windows CE, which supports a subset of the Windows API.

It's bigger and slower than the Symbian and Palm operating systems, which were designed from the start to work on handheld devices. But it does present developers with a rich and familiar platform.

Mike Silvey, of Windows mobile developer Dexterra Inc, told PCW: "Unless you've got a strong bent for Microsoft, the Palm is a much easier operating system for personal information management [Pim], so that's led a lot of companies to deploy Palm.

"But the Palm is awfully weak when it comes to the deployment of enterprise applications. People look at Pocket PC and say that the Pim is not as clean as Palm, but there's a lot of power here."

The new generation platforms are based on a version 4.2 of Windows CE that features a re-engineered Pocket Internet Explorer, with support for XHTML, CSS, JScript 5.5, and the new standard Internet Protocol IPv6.

There's also integrated support for Bluetooth and 802.11 wireless. But the biggest new feature in both Ozone and v.Next is the .Net Compact Framework (CF) in ROM.

This is a runtime layer that isolates applications from the operating system, managing memory and enforcing security. It should prevent buggy apps from crashing the device.

Developers can write CF applications in languages like Visual Basic and C#, which are more productive than C++.

Although similar in some ways to Java, the .Net CF has better integration with the full range of device features. Applications sell devices, which is why Microsoft is wooing developers.

Launched at the end of 2002, the Orange SPV is the only Microsoft Smartphone on the market.

Microsoft's other launch partner, Sendo, withdrew acrimoniously at the last moment. The SPV is powerful, but spoilt by somewhat awkward buttons, short battery life, and more than its fair share of bugs.

Around 60,000 units have been sold in Europe. It's a start, but a tiny figure in context. Worldwide annual mobile phone sales exceed 400 million, with over 150 million in Europe.

I asked Nick Balderson, vice president of product and infrastructure at Orange, why his company and Microsoft risked the reputation of the Smartphone by launching a buggy product.

"The first release did have some 'features' in it, there's no doubt, and we've been working hard with [Taiwanese manufacturer] HTC and Microsoft to resolve those," he said.

"We've recently put out Update 1.35, which resolved a number of those high-priority features and nearly doubled the battery life. When we bring any of the phones to market they have some issues.

"This is also the first phone ever that we can fix in the field. Had it not been for that, we would have taken a more conservative approach."

This 'release-first, fix-later' strategy is risky, but developers still like the platform. Orange also has a revised hardware design, the SPV E100, which fixes usability issues. But why does Orange bother with Microsoft when Symbian, Palm OS and Java are also compelling?

"From an operator's perspective, it's not in our interest to have any one dominant operating system," explained Balderson. "Our ideal world would be that we have a range of devices across all of those operating systems."

To make the point, Orange announced in April a deal with Handspring to develop Palm OS devices.

Some vendors, such as Sendo, found Microsoft impossible to work with, particularly when it tightly controlled its Windows source code. Did Orange have similar problems?

"It's been a joy to work on the project," said Balderson. "We've worked closely with HTC and with Microsoft. I recently had a meeting about what we'd like to see in future versions, and sat down with the guy who actually writes the code for that particular part of the OS."

In the fog of accusation and counter-accusation, it's hard to discern the facts, but clearly Microsoft treats Orange well. It also seems to be gradually opening up its source code.

It has announced the Windows CE Premium Derivatives Licence, which lets vendors see and, crucially, modify the source for their CE-based devices.

Microsoft's Steve Clayton insisted that things are coming together for the Smartphone. "Currently we have HTC, Compaq and Samsung manufacturing," he said.

"On the operator front, we have Orange, T-Mobile, and Smart in the Philippines. The launch was, in our eyes, a big success."

Industry politics make it highly unlikely that Microsoft will ever dominate phones in the way that it does the PC desktop, but there's room for Windows alongside its competitors in this vast market.