MS has two major advantages over the android platform.
#1: A clean start with almost zero fragmentation. Not only does android have many flavors (1.5, 1.5, 2.01, 2.1) but it has a fairly broad range of hardware (different resolutions, RAM, CPUs, GPUs, etc...). Android developers are usually forced to develop for the lowest common denominator. WM7 devs can take full advantage of hardware/software features because all the platforms will be similar. This is a major reason why the iPhone has been so successful.
#2: A wealth of development tools and experience. Let's face it, eclipse/java can't hold a candle to VS in terms of development time and options.
So we might see MS develop an app store full of good looking apps very rapidly.
Don't get me wrong - I love my droid, but after doing some android development projects I find myself looking more and more towards WM7.
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