It is little secret that the development of the next generation of Windows Mobile is a disaster. Windows Mobile 6.5 has been announced for the end of this year to collective yawns -- nobody thinks anybody is going to actually ship a phone based on it. Windows Mobile 7 has been announced for next year to barely concealed guffaws. Nobody who is serious expects a viable Windows Mobile 7 to come out anytime before the end of next year. What has happened, during this era of stagnation in Windows Mobile, is that WM vendors are now migrating to Android for their new smartphones. Android supports the new features of the new smartphone hardware, while Windows Mobile doesn't. And while Android is a user interface disaster, so is Windows Mobile -- both systems embody pre-iPhone paradigms of how to do things where each application has its own unique user interface, as vs. the new multi-touch common-user-interface paradigm where all user interface coding must go through a library that enforces a common look and feel. In short, where geeks used to go to WM because it was a (relatively) open platform with a lot of capabilities such as multi-tasking that the competition did not have, now they're going to Android instead because it has those same attributes but supports newer hardware.
So what seems to be falling out of all this is that Windows Mobile is going to go the way of old-school PalmOS shortly. The current vendors of WM phones such as HTC appear to be engaged in a mass migration to Android. But this does not mean that sales of the iPhone and Palm Pre will be hurt by Android. They are simply different markets -- Android, due to its fundamental design and development processes, will simply never be able to match Apple or Palm on ease of use or consistency of user interface between applications. Like Windows Mobile, Android is a geek product. Plenty of geeks will likely end up migrating to Android, but there is a huge market for smartphones as people max out the capabilities of standard candybar/flip phones between Twittering and everything else they want to do with phones, and most of these people are not geeks. Vendors like Apple and Palm are well positioned to go after that market... but Android simply doesn't play there, any more than RIM does with their crackberries.