This was launch day for Windows Phone 7. Fanfare was nowhere to be found. But inside the AT&T store was a device that boldly rethinks what a modern smartphone operating system should be like.

It just may be too late. If we lived in a different world Microsoft would take another six months and work out the bugs from what really feels like a beta OS. But they don’t have that luxury. In fact, Windows Phone 7 comes about two years behind the rest of the smartphone makers who scurried to start adding iPhone-esque features to their devices.

What I believe separates Windows Phone from the Droid line and others is that it is not another imitation of the iPhone. Yes there is a browser and apps, but the interface is reinvented. The live tiles are easy to glance at, flick and peruse.

Yet the time spent creating everything from scratch inevitably meant there would be flaws and missing features. So many, in fact, that most reviewers have praised Windows Phone for its bold look, but are holding off on recommending it until copy and paste, multitasking, HTML5 video viewing and other features come along.

I walked away from spending some time with a Windows Phone feeling that it was very cool and innovative, but not enough to buy one. And that is probably the rub – it’s cool, but it doesn’t give you that feeling of, “I have to have this.”

The holiday season will tell if Windows Phone becomes a major player or an obscure also-ran like HP’s Palm webOS. The market and consumers would benefit from Windows Phone’s success as it offers needed competition and some intriguing ideas. Like so many other products, it may suffer from the “it’s good, but not great” mindset.

Despite its unfortunate name this new mobile operating system may actually hold some promise for resurrecting Microsoft in the mobile space.  For a company often criticized for it’s failure to innovate, Microsoft looks like it really got it this time.

However, Redmond may have to fight the too-little-too-late feeling from many consumers. Apple, Google and Palm all have mature operating systems with a couple of years’ worth head start. Android releases a new device hourly and has won the hearts of most major phone manufacturers an many users with a deepening collection of apps. Palm has developed a core group of followers. And we don’t even need to go into Apple’s success.

However, I still think there is hope for Microsoft in mobile by playing up to how our business and personal lives intersect. Steve Ballmer talked up this very idea at Mobile World Congress.  I know plenty of people who carry a BlackBerry for work but then an iPhone for personal use. The lines between work and personal contacts and tasks are often blurry, so having a device that can be your music player, Internet device, office contacts and documents (and if you’re into it, your Xbox Live friends) might be attractive.

Then again, many people already have such a device. They call it an iPhone. And even with some of its glaring omissions, it still offers the best mobile experience – with some new functionality likely coming before the new Windows phones even hit the market late this year.

While it is encouraging to see Microsoft take bold leaps forward, it’s time to be a major player in the mobile space may be winnowing. This year will tell us if this bold move will succeed.