According to new data from NPD, 52 percent of the smartphones shipped in the U.S. during the second quarter of 2011 were running Android, up 19 percent year over year. Apple’s iOS charted significant gains as well, but along the same order of magnitude as Android’s. It claimed a 29 percent share in the U.S., up seven percent from the same period a year earlier.

Sadly for the rest of the mobile industry, much of those gains were delivered at its expense. Research In Motion’s BlackBerry OS, for example, saw its market share drop precipitously, from 28 percent in the second quarter of 2010 to 11 percent in the second quarter of 2011. Microsoft’s Windows Mobile suffered a similarly brutal decline, falling from 10 percent in Q2 2010 to four percent in Q2 2011. And, suffice it to say, Windows Phone 7 didn’t quite offset the difference.

A consortium of six companies last month paid $4.5 billion to acquire a portfolio of 6,000 patents auctioned by the bankrupt Canadian telecom equipment maker Nortel Networks, thwarting Google’s interest. The final amount, five times Google’s original $900 million “stalking horse” bid, stunned observers and raised concerns about how the consortium intended to use them.

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Whenever I know Microsoft CEO Steve Ballmer is going to speak at a major public event, I get two feelings at once: Excited anticipation that the chances are high that he’ll say something controversial and dread that the chances are high he will say something, well, controversial.

Which is just what happened at his opening keynote speech yesterday at the Microsoft Worldwide Partner Conference, which is taking place in Los Angeles this week.

At the event, Ballmer got off several good ones, which always happen when he makes fun of himself or Microsoft products.

Most effective was the tiny market share of the very laudable Windows Phone 7, which replaced its failed Windows Mobile efforts.

Said Ballmer with verve about the situation: “We’ve gone from very small to very small…”

Funny, right? Especially when he also made it clear that he thought Microsoft had made the right bet in moving to Windows Phone 7, which was a deft way of both poking fun at the company and praising it at the same time.

Of course, like the skunk at the garden party he often can be, Ballmer also could not resist dragging out his oldest chestnut about how much bigger that PC market is than that of its longtime rival, namely Apple.

But because he’s Ballmer, he plays it cute and can’t ever seem to bring himself to actually say the name of the company that has always been top of mind at Microsoft and always has remained the target of grumbly frustration.

The solution? Pretend Apple does not exist by belittling the competitor’s weakest point.

Thus, he trotted out the usual stats about how big the PC market is in comparison — about 350 million units with the Windows operating system compared to about 20 million of Brand A.

All true, except it only makes Ballmer look petty and backward-thinking, since those 20 million represent so much more than just laptop computers.

In fact, when talking about Apple, it also means smartphones — where the iPhone dominates Windows Phone 7 handily — and also tablets, a market where there is no contest between the iPad and anyone else so far.

And it also leaves out the excitement and thrill that Apple always manages to engender among consumers, the media and techies alike when it launches new products, which will be happening just a week from now with Apple’s new MacBook Pros and MacBook Airs debut.

Because, while Ballmer can make fun of Apple’s laptop sales all he wants, it only makes him look silly rather than witty.

In fact, when you’re as big a company as Microsoft, it’s only funny when you are shooting at a behemoth like yourself over failings. Best of all, you never run out of material.

And, if you do, there’s always Google to kick around.

That was especially true of owners of the HTC HD2 phone, a powerful slim device that was among the last and most capable of the Windows Mobile 6.5 devices. But while Microsoft never allowed such an upgrade, some tinkerers have managed to get the beta version of Mango — the next release of Windows Phone 7 — running on that HD2.

Although Microsoft has no plan to release such an update commercially, the company seems to be amused rather than irked at the developers’ creativity.

“We say tinker away with Mango and enjoy the juice,” Microsoft spokesman Bill Cox said in a statement to AllThingsD. “But beware the fine print — unlocking phones may void your warranty.”

Microsoft does plan to make the Mango release a free update for all existing Windows Phone 7 devices after the code is finalized this fall. Mango adds, among other things, improved browsing, integrated Twitter support and the ability to run more than one third-party program simultaneously.

The 70-person start-up is in the midst of rolling out new versions of its software and taking on additional funding. The company just closed $3.5 million in funding from Ignition Partners and expects to announce deals with other backers in the coming weeks.

Ignition partner Adrian Smith said he is glad to be investing in the company, since he’s been doing unpaid advertisements for the technology for quite a while now. “I’ve actually been an avid Swype user since the beta came out,” he told Mobilized.

For those who don’t know Swype, it augments the standard mobile device software keyboard by allowing users to trace the word they are trying to enter rather than pecking away one key at a time. The company’s software is loaded on about 26 million phones so far and is the default means of text entry on about half of those.

CEO Mike McSherry declined to say whether the company is profitable, but suggested the new funding was more about the opportunity to cement relationships than needing the money.

“This was an opportunistic fund raise for us,” McSherry said.

The new funding follows investments of roughly $6.5 million in late 2009 and early 2010 from Nokia, Samsung and DoCoMo, among others.

Next up on the product front is the addition of predictive text to the traditional Swype motion.

“We think that is going to be received very well,” McSherry said.

Most of the company’s business is being preloaded on Android phones, especially from Samsung, HTC and Motorola, though it is also adopted on Symbian phones as well as older Windows Mobile 6.5 devices.

Neither the iPhone nor Windows Phone 7 allow third parties to customize their software keyboards, effectively shutting out Swype on those platforms. However, McSherry said that the company has had talks with both companies.

“We want ubiquity and scale, so of course we would like to be on those,” he said. “We’ll see where those chips fall.”

The company also has its eye on tablets and other devices, as well as ways in which Swype could play a broader role in the phone’s user interface.

From McSherry’s way of thinking, the keyboard can be a starting point rather than just the last step in navigating a cell phone or other device. Why not, he suggests, start typing and then make a gesture to send the entered text as an email or to search the Web. McSherry said he can imagine even being on televisions and having a direct connection to a cloud service.

McSherry said that the partnership between Nokia and Microsoft could open things up on the WIndows Phone front, given that Nokia is a big backer of Swype, with CEO Stephen Elop tweeting in December about Swype as the best means to enter text.

“I would hope that would help us in trying to get on that platform,” McSherry said.

Smith said he likes the core technology because it allows people to be more productive on their phones. “You can Swype much more quickly than you can hunt and peck,” he said. But, he agreed that Swype needs to be more than just a one-hit wonder to reach its full potential. “There are a lot more things that they can do,” Smith said. “To me, if it was just a keyboard entry it wouldn’t be very exciting.”

News of Swype’s latest fundraising was reported earlier by Seattle-area tech news site GeekWire.

The company, which is also just on the verge of launching its product, was started by two former Google employees from the Android team. CEO Tom Moss said he and Gaurav Mathur saw a huge opportunity to offer companies the flexibility of Android with the kind of security features companies get with BlackBerry and Windows Mobile 6.5.

“This trend of consumerization of IT is really shortsighted,” Moss told Mobilized in an interview on Monday morning. Businesses still want the same things they always have, including high levels of manageability and security. However, the rise of the iPhone and Android with their powerful capabilities have left IT in reactionary mode. “We’re kind of going against the trend but we think it’s the right bet.”

As part of the deal, 3LM will be a wholly owned subsidiary and continue to work with multiple device makers, Moss said. Financial terms were not disclosed. Motorola was one of the companies that 3LM had been working with.

“We didn’t pursue anybody,” he said, noting there were multiple interested parties. “They are the only OEM that is just doing Android, which kind of matches our mojo and our DNA. We really think it is the best platform for enterprise IT.”

As for the acquisition, Moss said he had built a small team that did a lot of product development in a short period of time, but needed to start building up capabilities for sales and support, all of the kinds of things that would have required some sort of financing. “We don’t have to worry abut funding.”

The deal will also help the company get an in with the kind of customers and partners it needs. “It’s hard as a 10-person start-up to be taken seriously, where as if you are Motorola people will at least talk to you.”

Moss said there is a narrow window to shift the trend away from enterprises just “giving up” and allowing all manner of devices onto their network as long as they have secure email. Although that is where things are headed, Moss noted that a lot of businesses still use BlackBerry and even Windows Mobile devices because of their higher security, though clearly that trend is shifting.

“We really want to get that out there before people just give up on security,” he said. “It’s a question of urgency. We wanted to get out there really quick.”

The company, which started last year, has about $1.5 million in seed investment from angel investors and VC firm Accel Partners.

“Poor Mr. Elop. Has to make the big tech call not ever having written a line of mobile code or done system bring-up work,” Bray said in a tweet.

Bray later backpedaled, taking down the tweet and adding in subsequent postings (see below) that he has no inside info on Nokia, that he is not an executive at Google and that what he said is true of lots of executives, not just Elop.

But, of course, words aren’t the real issue for either Microsoft or Nokia. Apple and Android have already posted their real challenge, and it isn’t anything they have said on Twitter. Between them, they not only have most of the ultra-high-end smartphone business, but also the lion’s share of attention from developers, investors, advertisers and other key parts of the mobile world.

In going with Windows Phone, Elop is making a bold bet–both that Nokia will be able to stand out on someone else’s platform and, more importantly, that Windows Phone itself will be a winner.

Only time will answer that question. I would point out, though, that Nokia is not the first phone maker in a jam that made a bet on Microsoft. Some years back, Palm decided to start selling phones with Windows Mobile–the predecessor to Windows Phone. The venture was launched as a bringing together of two giants, with Bill Gates and Palm’s chief executive sharing a stage in San Francisco to tout the promise of the union. In the end, neither the Palm OS nor Windows Mobile were able to gain ground and the partnership fizzled.

We’ll get to hear directly from Elop on Friday when he addresses investors at a meeting in London. Mobilized will be there with live coverage starting at 11 am local time (3 am PT).

But it is a new day. Nokia is not Palm and Windows Phone is not Windows Mobile. The question now is whether this sequel will have a different ending.

That is a slower start than either Android or Palm’s webOS had in their debut, NPD said. Windows Phone 7′s sales put it not only behind Android, Apple and RIM, but also behind its own, older Windows Mobile operating system. Windows Phone 7′s two percent share was roughly equal to what HP’s Palm share was for the fourth quarter.

“With its mid-quarter launch, Windows Phone 7 entered the epicenter of competition between iOS and Android at AT&T,” NPD analyst Ross Rubin said in a statement. “Both competitors offer mature feature sets and large app libraries. Microsoft has made the case for Windows Phone 7′s differentiation and improved integration. Now, the company must close the feature gap, offer more exclusive capabilities, work with partners to deliver hardware with better differentiation, and leverage its extensive experience in driving developer communities to increase its app offerings.”

Microsoft has said some two million phones running Windows Phone 7 were sold to carriers worldwide, but has offered no data on the rate at which the devices were actually leaving store shelves.

AT&T, which sells the broadest array of Windows Phone 7 models, also hasn’t given specific sales figures but said that the numbers have been growing steadily since launch. LG, one of the phone makers that built Windows 7 models, indicated its sales were less than it had hoped.

Microsoft downplayed the meaningfulness of early sales figures.

“Sales are an important measure of success, but for a new platform customer satisfaction and active developer investment can be even more important leading indicators of long-term success,” a representative said in a statement, reiterating comments that the company made last week noting high customer satisfaction numbers and a growing base of applications. “These early signs of satisfaction from customers and developers are reason to be bullish about the foundation for long-term success for Windows Phone 7.”

Overall, NPD said that Android grew its share nine points during the quarter, grabbing 53 percent of the consumer market, while Apple iPhones accounted for 19 percent of the market, down four percentage points. RIM also had a 19 percent share, a drop of two percentage points.

The five top-selling handsets included three Android models and two versions of the iPhone–the iPhone 4 and iPhone 3GS. The iPhone 4 was the top-selling device, followed by the Motorola Droid X and HTC Evo 4G. The iPhone 3GS was the fourth-best-selling model, followed by the Motorola Droid 2. Motorola has already said it expects to take a hit this quarter, as its top-selling devices are on Verizon, which is now getting an iPhone of its own.

Sprint said the charge will help it keep its network running smoothly for all the data-hungry customers, and tried to put some happy talk around what is, essentially, a rate hike.

“Sprint wants its customers to experience the range of entertainment and productivity possibilities available with today’s wireless technology,” Sprint consumer business President Bob H. Johnson said in a statement. “While some of our competitors impose overage charges and complex plans, Sprint continues to provide a worry-free, unlimited data experience while on the Sprint network. This is responsible, sustainable and reflects our commitment to simplicity and value.”

Existing Sprint smartphone customers are not affected unless they upgrade to or activate another smartphone, the company said.

Lookout raised $11 million in Series B funding back in May.

The company was launched in 2007, with its founders taking 18 months to develop a new core technology focused on mobile devices. While some of the big-name security firms are in the mobile arena, their approaches are brought over from desktop and PDA security efforts, CEO and co-founder John Hering told Mobilized.

“I think there’s a very reasonable opportunity to create the next Symantec but built around the mobile platform,” Hering said, noting that over the next three to seven years mobile devices will become the primary computing device for millions of people.

Although threats to mobile devices are still comparatively rare, their highly mobile and always connected nature makes them an increasingly attractive target for those seeking to do harm. A year ago, Hering said that most attacks were proof-of-concept or attacks for notoriety. This year, though, has seen the rise of financially motivated malware, including an attack on Android where an app posing as a movie player sent premium SMS messages costing infected users $5 a pop. A separate attack in China infected more than one million phones, Hering said.

Lookout aims to stop those kinds of attacks and also allow capabilities like device tracking and remote wipe capabilities. Its software currently works on Android, BlackBerry and Windows Mobile (but not the new Windows Phone 7) operating systems. Hering said the company plans to expand to other popular operating systems and said some of the new funding will be used to expand to new platforms.

Ping Li, a partner at Accel and a board member at Lookout said the company’s approach of splitting work between the device and the cloud to more efficiently work on a mobile device is part of what attracted him to the company. He also pointed out that Hering and his co-founders are in their twenties and just have a different awareness of the devices than their older competitors.

“They grew up hacking mobile phones,” Li told Mobilized. “They never grew up hacking PCs.”

Part of growing as a security company is having the right product in place when a new threat emerges, Li said, pointing to Webroot, which came out of nowhere to become a significant business when spyware emerged as a major security issue.

The company has more than four million users of its software, although the vast majority are getting the software for free. The company recently launched a $3 per month premium service, but Hering won’t say how many customers it has.

Hering said Lookout’s model aims to follow that of desktop antivirus firm AVG, which has a popular and well-known free product but makes money by selling a premium service.

As for whether the company could make an attractive acquisition target for another security company looking to jump-start its mobile efforts, Hering was noncommittal.

“We’re just trying to keep up with the growth,” he said.

Consider this: In 2009, HTC, Samsung and LG accounted for 67 percent of Windows Mobile shipments. In the third quarter of 2010, those same companies accounted for 44 percent of Android handset shipments. Motorola and Sony Ericsson, also longtime Windows Mobile licensees, accounted for an additional 30 percent.

With Android commanding that kind of OEM attention, Microsoft is going to have to work harder than ever to rewrite the weak mobile story it’s written for itself over the past few years.

“To ensure Window Phone 7’s success, Microsoft must sign up virtually all of the name brand smartphone vendors who deserted Windows Mobile for Android when Microsoft failed to modernize the operating system for three years,” says Needham analyst Charlie Wolf. “Microsoft has signed up three of them and has two to go. Google would argue that it has the upper hand in this tussle because it licenses Android for free while Microsoft charges a licensing fee (albeit a small one compared to its PC licensing fees). But Microsoft simply has more at stake.”

And it knows it. Which is why it’s putting so many marketing dollars into Windows Phone 7.

Says Wolf, “We suspect the company will devote a material portion of [its marketing budget] to buy the support of the leading smartphone manufacturers.”