T-Mobile has stopped sales of its Sidekick handset after around 800,000 users lost their personal data, a situation that technology partner Microsoft said will most likely be permanent.

"The problems started over the weekend when users suddenly found that the data that they store on the handsets via a cloud service run by Microsoft subsidiary Danger had disappeared," said T-Mobile in a statement

"Regrettably, based on Microsoft/Danger's latest recovery assessment of their systems, we must now inform you that personal information stored on your device that is no longer on your Sidekick almost certainly has been lost as a result of a server failure at Microsoft/Danger.

"That said, our teams continue to work around-the-clock in hopes of discovering some way to recover this information. However, the likelihood of a successful outcome is extremely low."

The company also warned that Sidekick owners should not shut down the device, or remove the battery, as this would only make the problems worse. The company has offered affected users a month's free data use and is stopping sales until the problem is resolved.

The outage is a major embarrassment to Microsoft, which acquired Danger, the company behind the Sidekick, last year. It appears that the system backing up Sidekick data on a storage area network malfunctioned.

The situation has left T-Mobile and Microsoft with damaged reputations. The Sidekick was supposed to be a cooler alternative to the BlackBerry, and was aimed at boosting T-Mobile's data revenues, plans that now lie in tatters.

For Microsoft the damage is worse, with many now openly questioning whether the company can be trusted to run a cloud computing service.