I don't know what else they expected
Their dominance in the OS market is well known to have been bought in the early days, and Windows is the cheapest out-of-a-box system that offers conformity to what most consumers use at work.
However, no such forced brand 'loyalty' (can't think of a better way to phrase it) exists on mobiles, where the same consumers primarily choose from the handsets attached to the monthly tarrifs they want. Why would Microsoft assume the same brand would inspire mobile purchases in the masses? iOS bought something new, at the same time as exciting hardware, but Apple Corp were far from a consumer brand at the time, and viewed as elitist in the workplace. For me that was possibly their biggest strength at the time.
The iPhone was cool from a cool high end brand. Microsoft was the stuff we have to use at the desk and you get for free with your £200 laptop at PC World.