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Microsoft sees smartphone prices cut in half by 2012

Windows Phone division president Andy Lees tells Microsoft Worldwide Partner Conference attendees that smartphone costs before long-term contract discounts could hit $100 next year.

The head of Microsoft's Windows Phone division believes the company and its partners can cut the costs of smartphones running the company's mobile operating system by as much as half over the next year as a plethora of new devices hit the market.

Andy Lees, president of the Windows Phone division, told the 15,000 attendees at Microsoft's Worldwide Partner Conference in Los Angeles today that he expects the price of devices, before carrier discounts for long-term contracts, to hit $100 to $150 next year. Right now, they cost $200 or more, he said. And a year ago, those devices ran upwards of $400.

Microsoft's Andy Lees at the 2011 Microsoft Worldwide Partner Conference in Los Angeles. Microsoft; screenshot by Jay Greene/CNET

That's possible because chipmakers are now able to pack more and more functionality onto tiny processors that can fit into phones.

"You're seeing a dramatic price reduction," Lees said in a speech that was streamed online.

Lees also explained why Microsoft won't be offering its Windows Mobile operating system to tablet computer makers. The company believes that tablet users want many of the functions available to them when they use PCs such as the ability to connect to a network and the ability to print documents.

"We view a tablet as a sort of PC," Lees said.

And Microsoft's believes that tablets aren't PC replacements, as Apple's Steve Jobs has suggested, but rather pieces of the technical landscape that can all be used for different purposes. Microsoft wants to leverage its strength with its dominant Windows operating system in PCs to strengthen its position in mobile phones, where it's market share is small, and slates, where Apple dominates. Lees believes Microsoft's "unified ecosystem" will be a lure for consumers.

"We won't have an ecosystem for PCs, and one for phones and one for tablets," Lees said.

Microsoft's Steve Guggenheimer, showing an unnamed Samsung mobile phone, in a speech that was streamed online Microsoft; screenshot by Jay Greene/CNET

To that end, Steve Guggenheimer, Microsoft corporate vice president in the original equipment manufacturer division, showed off a handful of devices that will be hitting the market in the coming months that fit into that ecosystem. He quickly showed off phones from Acer, Fujitsu, and ZTE running the version of the Windows Phone operating system, codenamed Mango, due this fall. Guggenheimer also pulled a soon-to-be-released Samsung device from his pocket showing the unnamed model, he said, for the first time. He didn't offer any other details about the device.

"It's very thin and it's light," Guggenheimer said. "And that's the theme you're going to see as the processors get better." He also highlighted a few slate computers running Windows, including the Asus B121 slate and Acer W500, which both have a Trusted Platform Module chip in it that for corporate users that want added security. And he showed a slim Sony Vaio Z laptop, designed to give Apple's MacBook Air new competition.

"You give me any thin, lightweight laptop device, we'll take it head-to-head," Guggenheimer said. "You'll see a lot of innovation in thin and light."

Asus B121 slate PC Microsoft