The company had said previously that were affected only a "small number" of phones.
The owners have reported a number of issues after the download, phones damage, to become completely unusable.
Microsoft has pulled the update immediately after the problem came to light.
On the website of Microsoft, corporate blogger Michael Stroh wrote: "went perfectly with the upgrade process? No — but some large-scale software updates never do, and here the engineering team was prepared.
"Of course, when the phone is having a problem — or you're the one listening — is even worse."
The problem seems to have hit only phones Samsung, Omnia model in particular.
Bad connectionMicrosoft said that most of those affected had a bad internet connection, or too little storage on the computer that the update was installed from.
Blog posting company directs users to a resolution line guide, as well as suggesting that visit its Windows phone forum.
Many of the messages on that website users detailed attempt to recover their phones.
Lphilly79 wrote: "I disconnected the phone, remove the battery and the phone started again in the original (v7004).
"It is not obvious, changes were made and everything is ok, it's exactly as it was before attempting to upgrade".
It seemed a member, called Eliuzhi, has had less luck: "now my phone is bricked can't do anything!"
Microsoft has stated that it will release a new update as soon as it has identified how to fix the problem.
The company is looking to grow its lucrative smartphone market share, having lost ground to Apple, Google and Blackberry.
It recently announced a tie-up with Nokia that would see the producer's laptop running Windows Phone on its smartphone devices.
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