Tomorrow, Microsoft is widely expected to unveil Windows Phones 7 Series at Mobile World Congress in Barcelona. This is going to be a very important day for Microsoft as "7" will definitely be a make or break point for the giant in mobile. Up til now, Microsoft has no real response to the competition. Windows Mobile’s market share has plummeted to below 10%, while BlackBerry, Apple, Google and Palm continue to gain share. In a sense, it is stuck between a rock and a hard place: Apple has got its premium product with fantastic user experience; Google is giving away its OS to OEMs just as they really need something to fight RIM and Apple. As a result, typical OEM partners of Microsoft have flocked to Google for a piece of the action, while they are thinking what the Redmond giant is doing. Microsoft still hopes to license its OS (for a fee) to OEMs to build handsets, but it remains to be seen whether OEMs will pay for it. In the short term, we expect OEMs to still keep their hands in the Windows Mobile world. They don’t necessarily want to put all their eggs into one basket with any OS vendor. But longer term picture is unclear at this point.

Microsoft, we are watching you. Tune in at 6 am PST tomorrow.

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