> You are ignoring the decade+ behind WindowsCE and Windows Mobile. Microsoft has always been a player in this market.
It was a very different market that Windows Mobile competed in. A market that emphasized physical keyboards, rather than touchscreens. A market with $200 device subsidies, rather than $400 smartphone subsidies. That market disappeared, and so did Windows Mobile's chances. In fact, every major product from that market is either dead or on life-support. Palm, Blackberry, Symbian.
Today, Windows Phone 8 shares very little code with Windows Mobile 6.5. Maybe some drivers, that's about it. It uses a different kernel, a different UI toolkit, a different API.
Microsoft failed horribly in the PC spreadsheet market, too. But they threw away their original product (Multiplan) and ported Excel to the PC. Laughing at Multiplan's failure would've been irrelevant when discussing the prospects for Excel. The introduction of the GUI disrupted the existing market for DOS spreadsheets.
Similarly, the failure of Windows Mobile 6.5 is irrelevant for the purposes of discussing Windows Phone's prospects. The problem with Windows Phone is that not that Windows Mobile failed -- but that Windows Phone has a low market share.
A lot of the financial world runs on Excel spreadsheets and VB macros. Its scary, but I wouldn't say they have failed horribly at the spreadsheet market.
If you read my comment, you will see that I was talking about Microsoft's failed spreadsheet, Multiplan. Not Microsoft's successful spreadsheet, Excel.
> It was a very different market that Windows Mobile competed in
It seems you assume Microsoft decided not to compete then. I wonder why they made Windows Mobile then...
> Similarly, the failure of Windows Mobile 6.5 is irrelevant for the purposes of discussing Windows Phone's prospects.
Forgive my lack of faith, but a company that has, consistently and for as long as this market existed, failed to deliver a decent product, even despite the huge mountains of cash spent in developing it, seems a very unlikely competitor now.
The 360 is only "not a failure" because the rest of MS had been keeping the XBox division's life support going for 5 years (their worst years being the 2 immediately following the 360's release). While they're no longer bleeding cash, the XBox division is still not a net-gain for Microsoft.
The Xbox was a failure.
The Xbox 360 was better executed than the more ambitious PS3. It succeeded while the PS3 did not do so well, yet the PS3 is far from being a failure.
> Microsoft only decided to compete just over two years ago
You are ignoring the decade+ behind WindowsCE and Windows Mobile. Microsoft has always been a player in this market.