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Microsoft is upping its ante in the smart phone market. It recently previewed the next iteration of its Windows Phone software, code-named (and now more or less officially named) “Mango.” Will it have what it takes to compete with the iPhone or Android? A tour under the hood shows that Microsoft seems to be onto something here.

An announcement from Redmond helps break down what makes Mango cool. First, Microsoft rethought the various ways people use smart phones to communicate. They realized that there were a few ways to make communication with smart phones more flexible. A “threads” feature will let groups—sets of people you lump together and label with a certain name (“friends,” or “colleagues,” say)—move easily between SMS, Facebook chat, and Windows Live Messenger, all within the same conversation. If you’ve ever had the annoying experience of forgetting whether a conversation was transpiring on text, chat, or Facebook, “threads” solves that problem. A few other features of note: Multiple e-mail accounts can be seen within a single inbox. Twitter and LinkedIn feeds come integrated into contact cards (Microsoft has long been enthusiastic about Twitter integration). And devices running Mango will have built-in voice-to-text and text-to-voice (a topic on a lot of smart phone makers’ minds, of late).

Second, the Windows team rethought how we use apps. Wouldn’t it be nice if apps announced themselves to us, right when we need them? Mango will connect apps to search results, doing just that. It also allows quick switching between apps, for the inveterate multitasker.

Third, Mango promises to “take the Internet beyond the browser.” That statement is a bit grandiose, but it’s clear that Mango at least offers an improvement over the Windows Phone 7 experience. A browser with HTML 5 support and hardware acceleration means a faster browsing experience. The phone will also offer hyperlocal search, as well as “quick cards” that give you a brief run-down of a product, movie, event, or place, potentially saving you the trouble of clicking through to find that information.

The software update has already stimulated some new hardware. On Wednesday, a Reuters reporter learned that HTC had plans to build phones based on Mango software. “We have some Windows Mango phones,” the CEO of HTC, Peter Chou, said to the reporter “on the fringes of an Internet conference” in Paris, as Reuters colorfully notes.

Bear in mind, though, that Mango is an incremental update; a fuller software update on its phone software is expected next year. It may be until then that Windows really begins to cut into the market share enjoyed by iPhone and Android.

For more details on the phone, and an impressive demonstration on how its browser beats other phones—at least on certain media-rich sites—check out this YouTube video touting some of Mango’s new features.

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