So the truth is... I think they have been sold at a loss in the past.
I used to work at a Microsoft Store and prior to that I worked for other retailers who specialized in cell phones (Radio Shack, Best Buy, etc.), and I can remember when the 900 came out, and when the 920 came out, 8X and so on. And these were sold at much cheaper price than iPhones. At the time when they were on par, hardware-wise, or close to it with the iPhone of their day they would be $100 or more cheaper than the iPhone. And did that help it sell? Nope.
People, average people who aren't techy people who read tech blogs for fun and watch tech announcements for fun, make choices based on some simple things. Chief among those simple things? "What my friends told me."
What did I usually hear when I tried to push Windows Phone? "I've never heard of that. Windows on a phone?" And then I could see their minds picturing Windows XP on a phone, and I knew were on the wrong foot.
When I did encounter someone who had heard of Windows Phone it was usually, "My friends say they don't have any apps. I want apps."
At the MS Store we spent hours and hours training to overcome these objections. But sometimes you can't overcome it. "Well what apps do you want, we probably have it or something like it." "YouTube." crap. "Instagram" "Well we have this other app made to work with Instagram (prior to Instagram).." "But I want Instagram." "It's basically the same." "I don't care."
And I'm shortening this, we were actually much better at presenting this than I'm showing. But that's the short end of it.
Microsoft is in a chicken/egg situation on several fronts.
They need apps, but to get apps they need developers but to get developers they need users, but to get users they need apps....
They need name recognition, and positive word of mouth, but to get that they need people but get people they need name recognition and positive word of mouth...
The average user doesn't care that it's $100 cheaper. If they've decided to get something more than the cheaper phone, they've decided they want to spend money on the phone that makes them feel best. The phone that makes them feel best is just as much determined by the externals as the internals. Microsoft has the internals. They just don't have the externals.
And I say this with deep love for Windows Phone. I've given up mine for an iPhone. And there's not a single day I don't miss the Windows OS on the phone. It's perfect. But then I decide to download Infinity Blade, jobr, Starbucks, MindBodyConnect, Sunrise Calendar, Wunderlist.. (oh I could list the Microsoft apps that are better) and all I can think to myself is that right now.. right now I've made the right decision.