I don't think that this is the beginning of the end for Microsoft. I do feel, however, that in a few years down the road Microsoft might turn out to be primarily enterprise. It's currently their bread & butter, besides Windows. But I don't think that Windows will continue to be the cash cow it has been in the past.
I think that Windows is around 1/3 of MSFT's profit. If that goes away then MSFT becomes a
much smaller company. It also means that they would have less cash to use in new areas ... i.e. the snowball effect.
The longer this mobile lethargy goes on, the more I question whether it will go anywhere. I don't see WP going away anytime soon, besides the name of course. Microsoft has the resources to subsidize it forever. But if it doesn't gain significant market share in the next few years, I'd revisit that opinion.
If they lose their Windows cash-cow then MSFT will not have the "resources" to fund unprofitable ventures. MSFT has a lot of cash in the bank but that won't last forever if they're forced to spend it defending their cash cow(s).
Was Microsoft's intention for WP to be a tool to get users onto Microsoft services, or was it to make a profit from sales? It was probably some of both. Microsoft originally sold the licenses to Nokia and other OEMs, and then later bought Nokia's devices division. But even if WP was solely intended as a vehicle to get users onto Microsoft's services, are the numbers enough to justify it?
MSFT's "services" like MSN, Bing, etc. have been a money pit from the beginning, kept alive by the profits from their Windows/Office platform. I think MSFT realized that iOS and Android's popularity was eventually going to pull people off of MSFT's platform (Windows, Office, etc.) once AAPL and GOOG evolve their phone userbases to more capable systems with larger screens (OSX and ChromeOS).
What's funny is that MSFT did the exact same thing to minicomputer and workstation companies back in the 1980s and 1990s. PCs were considered a joke ("toys") back then but got bigger and better over time. The mini and workstation vendors (Wang, DEC, Sun, etc.) got eaten alive from the bottom up.
To prevent being eaten alive, MSFT needed to get serious in the phone/tablet space. So, they whipped out their big gun, Windows, and added a Phone UI (Metro) to it. I imagine their thinking was to get the 1+ billion Windows users used to the new Phone UI on their computers and then those users would naturally start buying Windows phones and tablets as companion devices.
It didn't work. Not only did users not migrate to Windows phones/tablets as hoped -- users stopped buying Windows computers because of its inappropriate UI! That's the user side of the disaster, I won't even go into the developer disaster that is WinRT.
Anyway, let's hope it takes off. I do my part: in the last year and a half or so I've bought around 10 new or used Windows Phones! I've since sold most of them, but I still have 2.
As an MSFT shareholder I thank you for the support! As a regular person I always say that people should buy what meets their needs. That's the best way to send a signal to a company. MSFT needs to see that they're on the wrong track and plunging sales is the best way to open their eyes.