A decade ago, Microsoft was at the top of their game. They "owned" the desktop, weilding the dual monopoly of MS Windows and MS Office, allowing them to introduce, virtually unopposed, new would be monopolies like MS Sharepoint...
Even though it was decidedly less technically excellent than Apple's MacOS, Microsoft had won the desktop with the "just-good-enough" Windows by being the comparatively open competitor to Apple's tightly controlled ecosystem. Apple insisted on controlling both the hardware and software for their Macs allowing them to limit the degrees of freedom to a very small set of "known good" technologies and tailor the user's experience - at the expense of freedom. Microsoft, on the other hand, courted and feted hardware OEMs and, despite Apple's head start in the PC business, Microsoft rapidly caught up, particularly in the business world where MS' focus on "productivity applications" (MS Office, mostly, led by their knockoff of IBM/Lotus' 123, the original commercial spreadsheet) made their software the de facto cornerstone (for better or worse) of every person employed at a desk job.
It was during the glory years of CEO Steve Ballmer, that he famously told IT media pundits "There’s no chance that the iPhone is going to get any significant market share. No chance."
Little did Ballmer know that was the beginning of the end for Microsoft's pre-eminence and thought leadership. Around that time, Apple could do no wrong, introducing OS X for Macs (surprisingly built on Darwin, an open source derivative of the Mach32 operating system, underlying their completely proprietary graphical desktop layer).
Apple also redefined the idea of "mobile computing" introducing first the iPod, then the iPhone, and finally the iPad tablet all running Apple's proprietary iOS platform (not the same as OS X, and no open source components). Apple's superb execution and authoritarian approach to the device marketplace "just worked", and people felt secure flocking to buy into this new "walled garden of Eden" for mobile computing. Not long after, for the first time since their introduction, the growth of the desktop computing market contracted, and has remained lacklustre since. The desktop market had achieved saturation.
Not long after Apple's iOS devices burst onto the scene, Google introduced the Android mobile platform, built on open source Linux underpinnings. Android was a wild west - the relative lack of Google-mandated controls quickly led to a chaotic seething Delhi-like marketplace of OEMs, software providers and sales channels in contrast to Apple's Singapore-inspired platform. Amazingly, within a couple years of amazing Apple device sales with record-upon-record quarter, Android did the impossible: usurping the title as the most widely used mobile device platform in the world. In 2013, new Android devices (smartphones and tablets) were being switched on at a rate of 1.5 million per day. That rate has only increased in the meantime.
Where was Microsoft though all of this? In short: nowhere. They were continuing to ride their desktop monopolies to record profits, but their mobile story involved only usurping (by encouraging them to take on former MS executive, Steve Elop, as CEO) and then killing the previous world's biggest mobile device seller, Nokia. This death was the result of Elop, realising that Nokia (both before and then under his leadership) had waited too far long to do anything decisive in response to Apple, like adopt Android or really promote its new "Maemo" Linux-based smartphone platform (which, despite a very good showing from the one handset marketed with it, was canned) and therefore had nothing to lose by adopting (along with a few other hapless and justifiably reluctant OEMs in Asia) MS' long awaited WindowsPhone mobile platform.
Unlike Google, Microsoft decided to adopt the Apple approach of tightly managing both hardware and software for WindowsPhone7. Sadly, for Finland's greatest-ever corporation, Microsoft's WindowsPhone play was both several too years late, and poorly executed to boot. They spent over a billion dollars marketing WindowsPhone 7. A year later, they'd sold a paltry few million handsets - Android was being introduced at a rate several orders of magnitude higher. What went wrong?!
Microsoft is selling a mobile experience that almost nobody wants. Rather than playing the role of the more open, flexible solution with broad OEM appeal, like the original Windows (it was merely "good enough" relative to Apple's MacOS in the early days of the mouse-driven desktop... but it was much more open and therefore succeeded in getting OEM support), they were beaten to the punch by several years by Google and Android, which (being mostly open source) was more open than they could ever be.
Microsoft instead, foolishly decided to adopt Apple's exclusive walled garden approach - exclusive, tightly controlled, and closed. Of course, they had none of the OEM support, no app development cache, no style advantages, and they were more than two years late to that party. Their offering simply isn't compelling when compared to the alternatives.
I'm not saying that WinPhone is bad technology - it's just not good enough to deserve a niche - it sits uncomfortably between the two well defined poles exemplified by Android and iDevices, and it simply looks "meh" in comparison.
Like the deranged hostage taker who has decided that his victims love him (Stockholm Syndrome, at best) only to find that they're just humouring him due to his control over them... and turn on him in as soon as they realise salvation is at hand, Microsoft hoped that people's "loyalty" to their Windows platform would somehow compell them to adopt WinPhone. They were, it turns out, somewhat misguided in that forlorn hope - their billions spent in marketing WinPhone were to no avail.
Microsoft has failed to parley the role they played in the desktop computing revolution into a simlar role in the mobile revolution. They failed by being desperately late to the party, not being open enough, and executing with the brutish arrogance of a corporation that assumes success is inevitable. Sadly for Microsoft, the facts seem to suggest otherwise.