I think Microsoft's problem is timing and market execution.
Back in the WP7 days it was Nokia that pushed Microsoft to begin catering to the low-end and Asian markets, but besides a few changes (albeit critical ones) such as reducing the minimum RAM requirement to 256MB, Microsoft was dragging its feet. In reality, that low-end market was truly where Android (at the time) was seeing a lot of growth, and had Windows Phone been present at those price points back then, it might have been able to carve out a significant area of the market.
So when the Lumia 520 turned out to be a relative hit, Microsoft was caught by surprise ... But anyone not under what I call the "Microsoft-logic" would have seen the low-end device being a hit from a mile away, but the technology still hadn't caught up, we began seeing dual-SIM in Windows Phone 8.1!
The problem as of late (or rather for the past year) was the lack of a compelling mid-range phone that was both good enough and affordable enough for many people around the world. We have yet to see such a Windows Phone device (that is available to most markets and available today).
For some bizarre reason it seems as though Microsoft split the equation into two polar diametrically opposite ends, the ultra low-end and the ultra high-end. As a result they're missing out on the growth that sits in the middle, the area where you need the $299-399 devices with good specs (i.e. S400 or S600 CPU, 1GB RAM, 720p screen, LTE, good camera).
The Android makers began exploiting that market 6-8 months ago, all of them. Had Microsoft and Nokia beat them to the mid-end as they did with the low-end (i.e. Lumia 520, which had more RAM at the time than similarly priced Xperias and Galaxys), they might have seen sharp growth in not only the user base, but also ASPs.
It is the same problem with their tablets and laptops. Instead of positioning Windows RT as the OS for low-end and super cheap laptops and tablets, Microsoft presented it as this expensive iPad competitor. However, Windows RT was and still is the ideal platform to directly counter Chrome OS and Chromebook, but ... Microsoft is being Microsoft.
It's the same joke with the living room. Microsoft should have pushed a cheaper $100-150 Xbox device in tandem with the Xbox One, but presented the cheaper one as the device for everyone. In addition to the TV integration and maybe even Kinect, they could have kept said Xbox Lite as a future device facilitating cloud gaming. But in truth it is Sony that's pushing on that very front with their PS Vita TV.
The most hilarious part of this is how the PS4 can stream games to the PS Vita TV... Given how the Xbox One is also a TV and general entertainment device, you'd think the hardcore gaming in the home would benefit from being able to play their X1 games on another screen, such as their tablet or PC? NOPE according to Microsoft...