Because they're playing catch-up. The way I perceive it is like Ballmer is the jealous kid, looking at what the cool kids have and going like "i want that too", things like Apple's dominance of the mobile and tablet market and Google's dominance over search and web services. He does not realise that MS has its own core strengths, things like Windows and the Office ecosystem and it is these things that they should be focusing on.
If at all it is needed for MS to become a player in search/mobile, they need to have something that will take the average consumer (NOT the wpcentral denizen) and absolutely wow him. Getting Instagram or Vine or whatever doesn't do it, that's playing catchup. MS is in a race where the top players are literally several laps ahead and trying to just match will not help. They need to show the users something that will make them come to WP and that's not been seen yet. Pureview is nice, but not worth the lack of WhatsApp, Swiftkey (bigram prediction), Google Maps, YouTube and file system access for me. For my sister, no Instagram, bad WhatsApp and bad Facebook. For my mom, lack of banking apps and no Swype-type keyboard killed it. These come from 1-3 weeks I made them use my L920. They went back to Android. However, both of them had great things to say about the camera and my mother especially liked the UI (sister didn't care for it).
So bright-coloured phones and a good camera are just not sufficient to attract consumers. My Nexus 4 doesn't have a great camera, nor does my sister's S3 Mini or my mom's One V. But these phones do what they want, and clearly what a **** of a lot of other consumers want.
And apologistic attitudes don't help; yes, WP is great for just a 2-year old OS, but who cares? If they want to play in the same arena as Apple and Android, they need to get their A game on. And do it right now. The market doesn't care if WP is 2 years or 20 years old.