Groupon Discount Doesn't Bode Well for Windows Phone 7

So just how well are handsets selling?

Last week, LG executive James Choi said his company's sales of WP7 phones were . But a month ago, Microsoft suggested consumer demand was sky high when it announced within two months after the WP7 launch. Upon further review, however, it became clear that Microsoft was crowing about , not to end users.

A deal spotted by hints that consumer demand for WP7 phones isn't all it could be. The Microsoft Store in Oak Brook, Illinois has halved the price of two WP7 handsets: The (AT&T) and (T-Mobile) are each $49- the regular $99.99 price. The limited-time discount runs through Wednesday.

Now, I'm not here to disparage Windows Phone 7, an innovative mobile OS that has received mostly favorable reviews despite missing some key features, including copy and paste and third-party multitasking. And the Samsung Focus is currently #9 on PCWorld's list of . But when a pair of new WP7 smartphones sells for half off, consumer demand probably isn't where it should be.

And what should Microsoft and its hardware partners do? Bargain-basement offers like today's Groupon deal may help lure consumers who'd otherwise gravitate toward the iPhone and dozens of Android handsets. But I suspect that Microsoft has a bigger problem on its hands. For many smartphone shoppers, particularly the younger set, "Windows Phone" anything simply sounds tired and uncool, even if Microsoft's mobile OS happens to be pretty good.

Perhaps Windows' desktop legacy is to blame. Microsoft's venerable OS is fine for your dad's beige Compaq desktop. But for smartphones? Not so much. The brand may hinder rather than help sales of WP7 devices, particularly in the consumer market.