With the announcement of Windows Phone 7, Microsoft's made it clear that they're finally—and truly—getting back into the game. They also brutally kneecapped their existing phone software, effectively taking Microsoft out of mobile for the next six months.
The last time a company broke so cleanly with their past like this, it was Palm, and the circumstances where similar: Palm OS was old and tired, and long overdue for a replacement. Palm as a company was perceived as lagging behind the rest of the players, and many had gone so far as to give up hope for anything interesting coming from them before a seemingly inevitable collapse. Then, they announced the Pre, discontinued their other phones, and clawed their way back into the running. They left their old OS out to die. They did it because they had to.
With Windows Phone 7, Microsoft has done the same thing, leapfrogging from a straining platform that bears a glaring resemblance to its earliest ancestors to the most exciting piece of mobile software the tech world has seen since the iPhone. Here's the difference: Windows Mobile 6.5.x isn't going away. When Palm preannounced the Pre, their Palm OS and Windows Mobile phones still existed, but there were only a few, and their phaseout was just over the horizon. Microsoft, on the other hand, is keeping Windows Phone 6.5.x alive for enterprise—we'll see more than a few Windows Mobile 6.5.3 phones announced before Mobile World Congress is over. Some of these phones—the standard issue corporate gear, the slide-out QWERTY emailing machines—will live out their dreary lives in so many belt holsters, as if nothing was announced in Barcelona today. The rest—the touchscreen consumer hardware, the phones you'll be able to pick up at your local Best Buy—have just been so brutally and thoroughly maimed, and rendered so spectacularly unbuyable, that Microsoft has effectively taken themselves out of the phone market until October—at the earliest.
Yes, Everything Is Different Now: Microsoft is ready to barge back into consumer smartphones, and they're not fucking around. But before they can, they need to purge, and that's exactly what they're doing. Microsoft just went on sabbatical from the category they helped invent. They better hope it pays off.