htc touch pro 6850 6950

Microsoft's long and winding road toward regaining lost ground in the cell phone business will reach an important milestone in Barcelona next month.

At the annual Mobile World Congress event, Microsoft will at long last show off Windows Mobile 7--its oft-delayed major revamp of the decade-old Windows CE code base that has been at the core of its mobile operating system since the days of challenging the Palm Pilot.

Sources told CNET that Microsoft is still planning to finalize the code for Windows Mobile 7 by summer in order to have the new software on devices that ship before the end of the year.

Separately, though, Microsoft is also working on a new consumer phone line, early pictures of which cropped up last year, that is designed to be the next generation of the Sidekick product line that Microsoft inherited with its acquisition of Danger.

Although it is not a widely rumored "Zune Phone," the new consumer device is based on Windows Mobile and likely to be able to connect to Zune and other consumer services that Microsoft has been developing for some time now, sources said. That product, also due to arrive this year, should come earlier in the year ahead of Windows Mobile 7 devices.

Microsoft declined to comment on Windows Mobile 7 or the new consumer device, but Robbie Bach, the head of the company's entertainment division, did tell CNET in an interview at January's Consumer Electronics Show that Microsoft would have a lot more to say about the future of the phone business in Barcelona. Microsoft has also promised developers headed to the Mix 10 trade show in March that they will be able to get information on how to program for Windows Mobile 7.

"Yes, at MIX10 you'll learn about developing applications and games for the next generation of Windows Phone," Microsoft said on the Mix Web site in a Jan. 20 update. "Yes, we'll have Phone sessions, and we can't say more...yet."

Although Microsoft has typically been loath to make major changes to the desktop version of Windows at the expense of compatibility, the software maker appears ready to make a bigger break with its mobile past--a sensible move given its declining share of both the market and developer interest.

With Windows Mobile 7 hit by several delays, Microsoft last year released Windows Mobile 6.5, an interim update designed to make the current operating system more "finger-friendly" on touch-based devices. The company also rebranded devices using its operating system as "Windows Phones" and launched a new marketing campaign.

At the same time, though, longtime Windows Mobile phone makers including Motorola and HTC have been gravitating toward Google's Android mobile phone operating system. LG, which had planned to center its smartphone efforts on Windows Mobile, has also said it will offer a number of Android-based devices.