A Microsoft official said the company and its partners may reduce the price of Windows Phone 7 devices by as much as 50% in some cases in order to boost demand for the system, which significantly trails Apple and Google-powered phones in the smartphone market.

"We are supporting componentry that that will allow us to go below $200," Windows Phone head Andy Lees told Bloomberg. Lees said Microsoft is counting on higher sales volumes to make up for lower margins that would result from a price cut.

Carriers like AT&T already offers some Windows Phones, such as the Samsung Focus, for as little as $50, but unlocked devices from retailers like Amazon sell for $250 or more. Microsoft currently holds about 5.7% of the U.S. mobile OS market, according to the latest data from ComScore. Google leads the pack with about 43.7%, while Apple is second with 27.3%.

[ Microsoft has nearly finished rolling its mobile OS update. Read Windows Phone Mango Goes Mainstream. ]

In addition to price cuts, Microsoft hopes the release of Mango, or Windows Phone 7.5, will boost sales. Mango adds more than 500 new features to the Windows Phone platform, including multitasking, 4G support, and the ability to work with rights-protected email.

"It leapfrogs the competition in many areas," said Lees, while speaking on stage at the All Things D conference in Hong Kong.

On Monday, Microsoft and AT&T introduced three new phones that come with Mango pre-installed--the HTC Titan, which features a big 4.7-inch display, the Samsung Focus S, which boasts 1.4-GHz processor, and the budget Samsung Focus Flash, which has a 3.7-inch display. AT&T has yet to announce pricing for the phones.

Microsoft is also counting on its alliance with Nokia, still the world's largest seller of phones by volume, to significantly boost market share. Next week, the Finnish company is expected to introduce its own line of Windows Phone 7 devices at its Nokia World conference.

"They are going to be investing very aggressively," said Lees. "They've bet the success of the whole company on Windows Phone."

Microsoft also recently struck a deal with handset maker Samsung under which the two companies will jointly invest in smartphone research, development, sales, and marketing. "You'll see that ramp up in 2012," said Lees.

Lees also announced that Microsoft plans to start selling Windows Phone 7 devices in China next year.

Surrounded by data? Demands from users for fast access? Endless retention policies? Cloud storage can help, say vendors. However, our survey reveals that IT is skeptical. Read our report now. (Free registration required.)