MS can't target the high-end as that's where the iPhone sits, and you won't get too many of them to switch.
Android got popular quickly by targeting the rest of the market. MS are also looking at the "next billion" phone users; those are from poorer regions of Asia and Africa specifically. Sadly to bring the price down, you need volumes, by flooding the market MS are getting a volume out there, which in turn will reduce the handset cost price, thus making a low-end Windows Phone as cheap as a dumb phone, so you can then get rid of all those standard mobile phones and replace them with a Windows Phone, which MS can try to sell apps (that's why MS are also getting more carrier billing options available).
I do see MS's strategy, however, it only works if you also have more mid-range and a few high-end phones to appease the folks who want to upgrade to the next level.
G.