Last week both Apple and Microsoft issued quarterly earnings reports. Apple reported 4.36 million iPhones sold in the quarter. It also sold 22.7 million iPods but didn't break out the number of iPod Touch devices among them.

• Total iPhone sales since launch in 2007: 17 million
• Sold in 2008: 13.7 million

Microsoft reported that there were approximately 5 million Windows Mobile devices sold in the same quarter. Some analysts and others have trumpted these numbers to argue that "Microsoft Beat Apple." In one sense that's factually correct. But this fact doesn't illustrate that Windows Mobile is doing well.

In fact there's something of an urgent need to reinvent windows mobile to make it more consumer friendly or risk diminishing smartphone share over time. Note that according to AdMob's data, and despite its longevity, Windows Mobile has a limited share of mobile Internet usage compared to other platforms:

There are a number of announcements expected from Microsoft's CEO Steve Ballmer at the forthcoming Mobile World Congress. Among them:

• Windows Mobile 6.5 (a stop gap before 7 in 2010)
• Skymarket, an iTunes-like apps store
• Services that connect a range of devices to one another, including mobile (perhaps the MobileMe competitor)

CNET has an interview with Microsoft's Andy Lees who explains that Microsoft has a number of things up its mobile sleve. 

But Lees said that Microsoft embarked on a new strategy some time ago that will come to fruition over the next 18 months. The first steps in that strategy, he said, will be announced at the Mobile World Congress conference that takes place in Barcelona in the middle of next month.

"You are going to see a bunch of announcements at Mobile World Congress but also it is going to be the beginning of a 12-, 18-month period where you are going to see a whole bunch of different stuff," Lees said.

Part of Microsoft's new strategy, Lees said, is not relying on operating system upgrades to improve its products. The new approach, while still making money by selling a mobile operating system, places considerable focus on services that help connect the phone to the PC and Web as well as devices such as the Xbox.

Microsoft has two separate teams at work on the services piece. One is Microsoft's Windows Live group, while the other is a rather secretive group headed by former Mac unit head Roz Ho--a group that also includes the team Microsoft acquired when it bought Danger. Lees declined to say specifically what Ho is up to, however.

Another CNET article advocates that Microsoft abandon its efforts to buy Yahoo and buy Palm instead. That's not a bad idea. The lattter's market cap is about $755 million. And the Pre now makes Palm a much more attractive company than it was just a few months ago (although the Pre OS is linux based).  The Pre may be the best iPhone competitor on the market.

One of the things that makes the iPhone unique is the multi-touch interface. The Pre also offers it. But Apple owns the patent, which creates something of a legal cloud over the Pre now. I'm hopeful that Apple doesn't do anything too heavy handed with Palm around this. 

Regardless, and despite the sales figures, Windows Mobile has a lot of work to do to keep pace with its faster-moving rivals.