They totally missed the boat
I remember in 2008 doing a direct comparison between an iPhone 3G which I had just got, and a Nokia 5800 Xpressmusic which one of my friends had.
He said 'Have a look at this, I can play iPlayer on my TV from my phone'.
Correct - he could, but it was shocking quality. Really blocky, very bad quality, very poor frame rate.
I then pulled out my apple AV cable and did the same thing via the iPhone. Perfect SD quality video without any issue, and then when the HDMI cables came out, perfect HD quality via the old iPhone 4.
And that was the simple thing - Nokia's devices were a briliant phone that happened to do things like data or video, but badly.
Apple made a device that was a computer and media content device first, and a phone second. And was easy to use. We all know how sodding bad an iPhone is as an actual phone. It's pants - drops calls all the time and much of the time will sit without ringing and then popping up a notification for a voicemail from the call you never got.
But maybe that is what people want now - a computer with apps in their pocket, not necessarily to make calls on it so much - you only have to look at how tariffs have changed to have unlimited voice and texts but limited data to see how the telco's have spun things 180 degrees.
So the only way that Microsoft / Nokia can get back in the game is to grow the apps side of their business. That is what keeps Android and Apple going.