I've written this on the CrackBerry forums but it applies here too.
The release of the iPhone in 2007 was an atom bomb that changed the history of smartphones forever. It was a massive leap forward in many areas, and the key here is that they were all areas that consumers valued. The iPhone announcement in January effectively started a clock on THE RACE. Which race is that? The race to be the OTHER platform.
It was a given that Apple's new mobile platform, built off of their very successful iPod, was going to occupy one of the 2 spaces - the question was: who would own the other?
Oh, were you one of those people who actually believed that there would be a 3rd? Or even a 4th? If so, you didn't pay attention to the closest analog available: the computer desktop, where there were only 2 commercial platforms (and a 3rd - Linux - that was both FREE and OPEN SOURCE, unlike the 2 leaders, and yet still has a single-digit percentage of the market).
The simple truth is that developers don't want to support 3 or 4 or 6 different platforms - that's inefficient for them and works against their best interests, which, ironically, is the VERY REASON that MS has prevailed in the desktop OS space - they owned one of the two available platform spaces.
The smartphone platform race occurred between 2007 and 2010 or maybe 2011. For sure, by 2011, it was clear who the winners would be.
The question you have to ask yourself is: what were the various companies offering back then?
We know WinMo 6.x was around, but was based around the stylus and resistive touch and could never compete with iOS and Android, even as rough as they were in those early years. Developers saw the big screens, touch UI, and all of those new sensors as a game-changer, and they flocked to iOS and Android. MS, BB, and others were trying to compete with legacy products because they got caught flatfooted - well, more correctly, because they were arrogant and didn't believe that Apple's long-rumored phone could possibly be a threat to their established platforms. I trust I don't need to post the Ballmer video to prove my point, right?
It turns out that those legacy platforms were part of the problem. None of the previous "competition" were willing to drop their old OSs overnight, and in Nokia's case, it took a new CEO and the infamous "burning platform" memo to create change there.
But the real competition was not for consumers - though they were important - it was really for DEVELOPERS. And MS simply didn't have everything else together and ready to go to fight the iPhone and then Android in 2008-9, and when they finally released WinMo7 in late October 2010, iOS and Android were on the final lap of the race, just as MS was getting out onto the track. It was those first 3-4 years where WinPhone lost, because developers could clearly see who had the best mobile platforms for developers in those years, and that was Apple and Google.
MS, though, wasn't finished failing. MS's roadmap could include SEVERAL complete resets, forcing developers to start over again several times over the next 6 years. That didn't happen with Apple or Google, because they weren't trying to join a new system to a legacy system, and didn't have all that baggage. Developers don't like having the rug pulled out from under them, and lots of those who had tried to give WinMo a shot gave up and left, devoting their attentions to the platforms that made them money - clearly that wasn't going to be WinMo.
The hand-wringing about Nadella is just like the complaints against John Chen for BB - new CEOs who came in to fix the business as a whole, and not the gangrenous limb that was killing the patient. Both were more than willing to saw off that limb to save the company, and the diehards will never forgive them for that, but neither were the people who caused the original disease in the first place. You have to look at who was in charge while rumors of an Apple smartphone began back in 2005, and grew stronger from multiple sources back in 2006. Who was it that was ignoring this threat, and not preparing to fight a (tech) war for mobile space? Hint: it wasn't Nadella or Chen.
MS is finished with smartphones. There won't be a SurfacePhone or any kind of Windows Phone until - perhaps - MS weans ALL users off of Win32 everywhere and everything on the desktop moves to a platform that can ALSO run on mobile hardware... WELL. IMO, that's a decade or more away. But until MS can re-enter the space using their desktop OS and ecosystem to create an opening, you can forget about a Windows Phone of any kind. At least, that's how I see it.