Oct. 10 (Bloomberg) -- Microsoft Corp. this week unveiled a new version of its Windows Mobile operating system for smart phones, and manufacturers are offering a raft of fresh handsets to take advantage of it.

Not to be too harsh about it, but the phrase that suggests itself is “lipstick on a pig.”

Previous generations of Windows phone software were clunky and hard to use. The new version, Windows Mobile 6.5, is a step in the right direction, but only a small one. It still falls far short of competitive offerings, most notably Apple Inc.’s iPhone and Research in Motion Ltd.’s BlackBerry.

Like the BlackBerry, Windows phones were originally aimed at business users, and as recently as 2007 Microsoft’s operating system was No. 2 in the global smart-phone market, trailing only Nokia’s.

Since then, the market for smart phones -- which are really small computers, capable of surfing the Web, handling e-mail and accessing multimedia content -- has exploded, with global sales up 27 percent in this year’s second quarter, according to Gartner Inc.

Meanwhile, sales of Microsoft-powered phones have stagnated. The company is now in fourth place, trailing both Apple and RIM, which has done a far better job of breaking free from the corporate ghetto and turning its phones into consumer products.

An Interim Product

As the decimal point in the name suggests, Windows Mobile 6.5 is an interim product. Most of the changes it introduces are in the user interface -- de-emphasizing Microsoft’s traditional stylus navigation in favor of your fingertip, for example -- and in some new services designed to be more consumer-friendly.

To get a feel for version 6.5, I borrowed a new Windows phone made by Taiwan-based HTC Corp. that is known as the Pure in the U.S., where it’s available from AT&T Corp., and as the Touch Diamond2 elsewhere in the world.

The Pure is a nice piece of hardware, narrower and slightly shorter, but thicker, than an iPhone. It comes with a vivid 3.2- inch touch screen; there’s no physical keyboard but there is, tucked away, a stylus.

Microsoft’s new approach starts even before you unlock the phone. When you awaken the screen, a tap reveals icons that show whether you’ve missed any incoming messages. Enter your password, and a colorful, customizable “Today” screen lets you see how many e-mails you’ve received, who’s called, and reminders about pending appointments.

Not Enough Change

Get too far beyond the Today screen, though, and you begin to sense that not nearly enough about Windows Mobile has changed.

Navigation, never easy, has in some ways become even harder with the move toward touch technology; little “x” and “ok” buttons in the corner of a screen, which you can hit with reasonable accuracy with a stylus, are much more difficult when using a finger. The same with scroll bars: I often found myself accidentally opening an e-mail when all I meant to do was flip through the list of messages.

One of Windows Mobile’s historic strengths may also be turning into a liability. The fact that it runs on many different kinds of devices from many different manufacturers and carriers makes it hard to establish and maintain a consistent look and feel.

In the case of my test Pure, for example, I was constantly stumbling into HTC’s interface and AT&T bundled applications that duplicated Windows functions. For instance, depending on the circumstances, Web pages would sometimes show up in Microsoft’s Internet Explorer browser, other times in Opera, a browser with a different set of controls placed there by AT&T.

Beating Apple

In its effort to tilt Windows Mobile more toward consumers and less toward companies, Microsoft may have better luck with some of the new services it’s introducing along with the operating system. For example, one of them, MyPhone, offers some of the features of Apple’s $99 MobileMe program at a much more attractive price: free.

MyPhone provides a backup function that automatically saves your data, including photos and text messages, to the Web. Should you lose your phone, you can attempt to pinpoint its location based on its most recent contact with the MyPhone service. If that fails, for $4.99 you can activate a set of applications that, for seven days, allows you to remotely lock the phone and display a text message on it, force it to ring even if it’s set on silent or vibrate, and wipe it clean.

App Marketplace

Following the lead of Apple’s iTunes App Store, Microsoft is also introducing a marketplace to buy programs for Windows Mobile devices. The offerings so far are scanty: The store launched Oct. 6 with a fewer than 300 apps, compared with what Apple claims to be 85,000 now available for the iPhone. Microsoft is banking that publishers of existing apps available from other sources will gravitate to the new store.

In the meantime, prepare for confusion. The Pure’s home screen, for example, includes an icon for AT&T’s own app store - - like Microsoft’s icon, a blue shopping bag with handles, except bearing the AT&T globe rather than the rectangular Windows logo.

It’s a fair bet that a lot of people have been carrying Windows phones because their company made them, not because they chose to. While the new software suggests that Microsoft is at least pointed in the right direction, it’s hard to shake the feeling that this product is just a stopgap until next year’s promised introduction of Windows Mobile 7. Let’s hope the changes in that one are more than cosmetic.

(Rich Jaroslovsky is a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net.

Last Updated: October 8, 2009 21:00 EDT