NEW YORK, ( TheStreet) - Microsoft ( MSFT) is sidelined as a new-generation of mobile software players take control of the game.

It's been a particularly rough week of developments on the mobile front for Microsoft. On Wednesday, top computer shop and biggest Microsoft customer Hewlett-Packard ( HPQ) swept up Palm ( PALM) in a $1.2 billion deal. The following day, it what can hardly be viewed as a coincidence, H-P pulled the plug on its Windows 7-powered Slate tablet computer project, at least according to TechCrunch.
H-P Slate
HP Slate

The move comes as Microsoft ends its stylus-driven dual-screen Courier tablet project, according to Gizmodo, effectively putting Microsoft's tablet effort on a shelf.

With the rise of Apple's iPhone operating system, which runs iPad, and the spread of Google's ( GOOG) Android software to more mobile devices and eventually tablets, "Microsoft is increasingly marginalized," says Rodman Renshaw analyst Ashok Kumar.

The developments highlight the ongoing shift in computing away from desktops to mobile devices. The shrinking size of computing devices and the lower power requirements have also forced a move to lighter software, not exactly Microsoft's sweet spot.

"Microsoft has always fallen just short of expectations in mobile," says Kumar.

In contrast, Palm's WebOS is a mobile device system, and it has emerged as a viable alternative to Apple's iPhone OS and Google's Android software. H-P's Palm deal is all about tablets, said TheStreet contributor Gary Krakow.

At this point, with application developers focused heavily writing programs for Apple and Android, Microsoft's late entry with its upcoming Windows Phone 7 software faces an ever rising hurdle.

Microsoft shares were down 1% to $30.81 in early trading Friday.

--Written by Scott Moritz in New York.

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