Reports of Microsoft's demise in the consumer space are in, but are they premature?A New York Times blog post last week highlighted influential tech writer and analyst Mark Anderson's assertion that Microsoft just doesn't understand consumers. Specifically, it's smartphones that elude Redmond."Phones are consumer items, and Microsoft doesn't have consumer DNA," said Anderson, who writes the widely-followed Strategic News Service technology newsletter.[ For complete coverage on Microsoft's new Windows 7 operating system -- including hands-on reviews, video tutorials and advice on enterprise rollouts -- see CIO.com's Windows 7 Bible. ]Although Microsoft owns the PC market and corporate desktop, few would dispute that Windows Mobile has fallen way behind the iPhone, BlackBerry and, more and more, Google Android."Windows Mobile is in big trouble," says veteran industry analyst Roger Kay. "Apple expanded its mobile platform and other competitors like Palm and Google have followed. But where's Microsoft?"\nSlideshow: Seven Features in Windows 7 You Probably Don't Know About\nSlideshow: Windows 7 in Pictures: The Coolest New HardwareMicrosoft could pay a heavy price for this slide as mobile devices and other technologies such as Web-based applications and social networking platforms make their way into corporate environments. In a NetworkWorld story this week, IDC research vice president Al Gillen discussed the eventual shift away from the Windows client OS as businesses become less reliant upon the desktop PC and move to devices such as smartphones, thin clients and browser-based devices that run on non-Windows software."All these devices are going to come along that Microsoft does not own, which creates a whole new battle field," Gillen says, adding that the transition will result in more virtualized and cloud-based software and "in the process, help break the dependency on fat clients and full local processing."Gillen is not saying Windows is dying, and emphasizes that Windows 7 will be successful and adoption will be strong for the next five to seven years. But during that time period the world will become "a lot less centralized around the PC than it is today."This ties back to the notion that Microsoft is losing ground with consumer trends that are destined to influence corporate adoption. Areas where Microsoft has failed or not dedicated enough resources such as mobile, SaaS (software as a service) and social media will fold into enterprise technology over the next few years, say industry analysts. Yet despite Anderson's claims that it's "game over" for Microsoft in the consumer space, the software giant is the proud owner of many superior consumer products and services.To name a few: Xbox 360, Zune HD, Bing and the Windows 7 OS and features therein such as Windows Media Center. Microsoft is planning to open retail stores and has been vocal about facilitating an entertainment hub in the home by linking the Xbox and Windows Media Center on the PC. It has also been aggressively pushing its "three screens and a cloud" strategy to connect media on phones, PCs and televisions.The consumer focus is also evident in Microsoft's advertising. TV commercials such as the "Laptop Hunters" and "Rookies" series, as well as ads for Windows 7 and Bing are more lively and engaging than past campaigns. For a company known for its coldness, Microsoft's TV ads have been warm and fuzzy.Microsoft undoubtedly has the potential and deep pockets to balance both the enterprise and consumer worlds. More of the humor from recent ad campaigns could go a long way on the consumer side, says Rob Enderle, president of tech consulting firm The Enderle Group."Microsoft, a decade ago, was known for its sense of humor and positive image," says Enderle. "Both have eroded sharply, and this has made them vulnerable to brand assassination advertising from Apple."Microsoft executed well with the marketing of Windows 7, notes Enderle, and now needs to "bring this effort up to corporate to improve its image and rediscover its public sense of humor."However, it will take more than funny and inspiring advertising to resurrect Windows Mobile. The release of Windows Mobile 7 in late 2010, which promises to be a significant upgrade, will help. But it's a long way off, and until then Windows Mobile will remain Microsoft's Achilles' heel in the race for consumers. Echoing Anderson's grim prediction, analyst Kay says: "If Microsoft delays much longer on producing a decent mobile platform with software, services, and partners, then they're out of the game."Shane O'Neill is a senior writer at CIO.com. Follow him on Twitter at twitter.com\/smoneill. Follow everything from CIO.com on Twitter at twitter.com\/CIOonline.