The situation isn't quite as simple as just being late to market. Let's review the situation leading up to the release of Windows Mobile phones.

Microsoft had been after the portable device market for some time, beginning with Windows CE, first released in 1996.

This was followed up with the first versions of Windows Mobile in 2003, including a few early phones that were essentially a PDA with telephony grafted on. By the time these appeared, Blackberry was in full swing and had already commanded the lion's share of the enterprise computing market.

Both efforts struggled due to a weak user interface that attempted to mimic desktop Windows, and the generally anemic performance of portable devices prior to the mid 2000's. Ironically, the last versions of Windows Mobile had a vastly improved user interface, and introduced the concept of apps that ran as a large icon... an interesting idea that never caught on.

Microsoft had been working on a pad style computing device since the early 1990's, and publicizing that effort, but never could come up with a truly useable device. In fact, it was an inebriated Microsoft engineer bragging about this to Steve Jobs a party at Steve's house, that led to Jobs initiating the Apple pad project that led to the iPhone. Apparently, ticking Steve off wasn't a wise thing to do.

Apple began work on iOS around 2005 for a pad project (after the aforementioned party encounter) which was put on hold when they decided to build their own phone after a troublesome experience dealing with integrating iTunes with the Motorola Rokr phone. Since both multitouch and a portable OS had been developed for the pad project, the iPhone simply reduced the size of the device and built on the existing work. Apple's early success followed the iPod, which had revolutionized portable music players, and had established a substantial online retail presence with the iTunes Store... Microsoft had nothing like that, and couldn't create it overnight.

Keep in mind that the Apple of 2007 was not like the Apple of today. At that time, it was regarded to be the pinnacle of innovation after the success of the iPod, a major factor in the rapid adoption of the then radical iPhone in 2007... Apple had a reputation for producing substantial advancements to tech that worked very well. Sadly, after the death of Jobs, innovation at Apple ground to a halt, followed by the departure of most of the creative leaders.

Android began life in 2003, purchased by Google in 2005 (for $50 million). The initial version in 2006 used a Blackberry style keyboard and no touch capability, but when iOS debuted in 2007, Google postponed the release until multitouch and a virtual keyboard could be added. Android was based on open source, and Google allowed apps to be installed (albeit with warnings) from sources other than their store, to encourage a wider variety of apps.

Why didn't Windows Mobile succeed? A few factors come to mind:

By the time Windows Mobile had come out, Apple was in full swing with the App Store and externally developed apps, and Android had added the same feature. The independent developers had already committed to one or both of those platforms, so a third platform struggled to attract mobile developer mindshare, while existing Windows developers weren't really geared to this new market. Technically, this might qualify as 'late to market', but when combined with the previous lackluster MS efforts that had been going on for over a decade, may have made astute mobile users wary of a MS mobile product.

MS bet heavily on integration with Windows Desktop. As most mobile devices ended up being used with little or no integration with a desktop OS, this wasn't a compelling factor.

Microsoft's reputation had suffered in the years leading up to the mobile revolution. Windows, while a virtual monopoly, had been slow to improve the user interface and reliability (Blue Screen of Death), as MS rested on it's monopoly and raked in the cash. In a panic, MS released Windows 8, which grafted a mobile front end onto a desktop platform, a combination that did not work very well. That may have been a factor in resistance to adopting Windows Mobile phones.

The fact that MS had muddled about unsuccessfully with a pad project for over 15 years, when Apple got it right in around three, and Google appeared out of nowhere with an open source version in another three, wasn't lost on the computing community.

It helps to put this in the context of the time. In 2010, MS was still regarded to be the slow, plodding monopoly that you had to put up with on your desktop. Since that time, MS has been transformed into a much more responsive and quicker moving company. A major culture change, that is a story unto itself.

There appears to be an element of 'we've had enough of Microsoft' going on there.

Did Google simply beat Microsoft to market?

No.

• Microsoft have been producing phone operating systems since at least 2003

  • Windows Mobile 2003 for Pocket PC Phone Edition
  • Windows Mobile 2003 for Smartphone
  • Windows Mobile 2003 SE for Pocket PC Phone Edition
  • Windows Mobile 5.0 Pocket PC Phone Edition

• Steve Jobs unveiled the Apple iPhone to the public on January 9, 2007.

• According to Wikipedia: "Android was unveiled in 2007, with the first commercial Android device launched in September 2008."

• Microsoft's "Windows Phone" operating system was released in November 2010. But this was just the latest of a long succession of phone operating systems from Microsoft.

There must be other, more significant, reasons why Microsoft failed in this market and wasn't able to leverage it's desktop monopoly or capitalise on it's existing long-standing product user base in the phone and mobile devices market.

This started as a comment on T.E.D.'s answer, and has turned into some insights into the smart phone market and why Microsoft failed.

Full disclosure, I work on a Macs, game on Windows, and use Android phones. My first smartphone was a Nexus One I got for free(!) for attending a free Android Developer Tutorial hosted by Google back when Android was kinda crap. Never did write an Android app.

While raw numbers of devices shows Apple "losing" and Google "winning". The reality is they're both winning at their chosen games.

Alphabet (Google's parent company) doesn't sell phones. It doesn't sell software. Even most of its services are free. Alphabet sells its users. Alphabet makes its money on advertis*m*nts and selling its users behavior. Alphabet made $95 billion in advertis*m*nts last year, 86% of its total revenue. Android exists to funnel users to Alphabet's services so it can serve them ads and collect extensive data about their users to sell. It's in Alphabet's best interest for Android to be free and ubiquitous and on as many phones as possible.

In stark contrast, Apple is primarily a hardware company. Apple makes over half its revenue selling iPhones to the tune of $142 billion in sales last year. iPads made $21 billion. In comparison, Macs made $25 billion. iOS exists to sell iPhones and iPads.

Both companies make money from their app store taking anywhere from 15% to 30% of app sales as well as subscription fees. But this is small potatoes compared to their major earners: advertising (Alphabet) and hardware (Apple).

Clearly both are doing quite well.

What about Microsoft? Unlike Alphabet and Apple, Microsoft is scattered. Rather than a colossus, Microsoft is a conglomeration of divisions. Their revenue is evenly split between "Productivity and Business Processes", "Intelligent Cloud", and "More Personal Computing".

This includes their software such as Office, Skype, Exchange, SharePoint, Outlook, and Dynamics. These have consumer and enterprise versions, installed and cloud versions. They run Web sites like Linkedin, Github, and Bing. They do financial management, resource planning, and supply chain management. They have developer tools like SQL Server, Github, Visual Studio, and Azure. They sell the XBox, and develop and publish games. They sell tablets, keyboards, mice, and accessories. And, of course, they do Windows.

Android is a core part of Alphabet's strategy to serve ads. For Apple, the iPhone was developed as one of its small stable of hardware. But for Microsoft, Windows Phone was just one more product in a sea of products.

To put this in perspective, in 2010 when Windows Phone 7 came out, the revenue for Microsoft's entire Entertainment and Devices Division division which included XBox, Zune, PC Games, Mac software, PC hardware... and the Windows Phone was $8 billion. In 2010 Apple sold $25 billion in iPhones alone.

This lack of focus meant despite Microsoft's huge size, compared to iPhone and Android, Windows Phone was rushed and starved of resources.

Part of the reason behind a lack of upgrade path for applications, [Larry Lieberman, senior product manager for Microsoft's Mobile Developer Experience] added, was the timing required to push Windows Phone 7 Series to market. "This product was delivered in an incredibly accelerated timeframe," he said. "If we'd had more time and resources, we may have been able to do something in terms of backward compatibility."

Source

As a result, Windows Phone 7 broke backwards compatibility with Windows Mobile 6 wiping out their software library. Windows Phone 7 phones couldn't run Windows Phone 8 making upgrading expensive. Unlike Android's integration with Google's excellent services, Windows Phone was saddled with Bing services.

iOS and Android are dedicated smartphone and tablet operating systems allowed to do their own thing separate from their desktop counterparts. In contrast, Microsoft further complicated Windows Phone by attempting to unify their desktop, tablet, and phone operating systems. This extended to software, user interface, and branding. It might have been a major coup if they pulled it off, but they didn't. Instead this "one size fits all" approach lead to confusion and compromises for all.

Examples include their attempt at unifying the user interface with Metro. Small touch screens have very different needs from mouse and keyboard based monitors. The result was an interface that worked well enough on phones and tablets, had some interesting features for touch screen laptops, but was a jumbled mess on desktops harming Windows 8. In the end, touch screens did not become ubiquitous in the laptop and desktop space.

Windows RT promised to move applications seamlessly between desktops and tablets, but instead resulted in something between a crippled laptop and a very expensive phone further diluting the Windows Phone.

Microsoft learned the hard way what Apple knew: phones are not laptops nor desktops.

The Windows Phone was rushed, under-funded, and unfocused. It was saddled with second-tier services and a design compromised for other devices. Application developers were hamstrung by incompatibilities. Was it a smartphone or tiny laptop? It tried to be both on a budget for neither.

Sources

• Apple's 2010 10-K
• Apple's 2019 10-K
• Alphabet's 2019 10-K
• Microsoft's 2010 10-K
• Microsoft's 2019 10-K