Windows 7 isn't much of a competitor. It had a smaller debut than Android and iPhone, by a large amount, and is being outsold by both so the gap is widening. If I were Nokia, I wouldn't be worrying about fellow also-rans in the industry, like Microsoft. I'd be worried about the products that were eating my lunch, and I'd let Microsoft figure out how to protect their own lunch.
If Nokia chooses Windows for their next generation, I'd wager they'll keep dropping like a rock. How could they generate any excitement over a Windows phone? Nobody likes Windows phones, even people who like Windows on the desktop.
My hypothesis is that Windows Phone 7 is a stop-gap measure introduced to build their brand and app portfolio while they're working on the 'real' thing. Note that WP7 apps are .NET apps, so transition to a pure .NET kernel would be relatively easy. Of course I have nothing but a hunch and some rumours, to base this on, but I find it highly unlikely that MS is just going to sit there while Google is building the dominant platform for internet usage (note that in some countries, like India, smart phones are now the most popular device for accessing the internet).
Remember that although us geeks are picky about the OS our phone runs, a the large majority of phone buyers really don't give a crap and switch easily. My girlfriend goes into a store and just picks out something shiny, possibly looking for specific features like a keyboard to type out email on. And app portfolio isn't just a matter of quantity. About 10% of the apps on any given platform probably satisfy 90% of a user's needs. Microsoft really just needs to have that 10% to be a compelling alternative, and they have the cash to simply write it themselves or pay people to write it for them.
So all in all, I don't think that Microsoft is out of the game just yet. On the contrary, they're just getting started, and this deal with Nokia is going to be very valuable for both companies.
So, what? Everything in userspace on an Android phone is Java and runs in the JVM. That's not really a feature users care about, but even if it were, the leading OS already has it.
You then go on to say:
"Remember that although us geeks are picky about the OS our phone runs, a the large majority of phone buyers really don't give a crap"
Which I agree with. Which is why there's no reason for someone to switch to a Windows phone, even if, on some technical level a .Net phone were lovelier than the competition.
Just because the next magical version of Windows is based on a smarter core, doesn't mean any normal user will have a reason to switch.
"On the contrary, they're just getting started, and this deal with Nokia is going to be very valuable for both companies."
You still haven't answered why Nokia would sign on with another sinking ship rather than simply choosing to make great devices for the leading (free) OS.
Of course, because the new CEO is coming from Microsoft, he may very well have loyalties that simply don't make sense for his new company...and if that's the case, he'll merrily drive the company into further insignificance while drawing a nice fat paycheck, and making his friends at Microsoft happy.
I agree, but chip makers, handset makers, and ultimately carriers do care. Apple, Sony, Microsoft, and Nintendo sure care a great deal about people jailbreaking their devices.
My point was not that a new kernel would directly persuade potential buyers, but I do think it is needed to support the features that users have come to expect from modern phones (i.e. multitasking). In my opinion WP7 is just not up to the task, so if they want to compete, they need to step up their game in the OS department.
"You still haven't answered why Nokia would sign on with another sinking ship rather than simply choosing to make great devices for the leading (free) OS."
I don't know, maybe MS is giving them a truckload of money? Nokia has a large software development group, so maybe the deal is that Nokia will develop apps for WP7? Maybe they just want to differentiate from the Android horde? I really don't know why they would go with MS, if indeed they choose to do so, but all I'm saying is that I don't think Windows Phone is a 'sinking ship'.
That's a bit categorical, no? I know at least two people who quite like their Windows Phones. Before you ask, not all of them work at Microsoft.
This leads me to believe that 50% of the people you know who like their Windows phone do work at Microsoft.