I think you're forgetting how much of a gap there used to be between phones - mostly feature phones - drawing <1W for the entire package on idle and even "ultra-portable" laptops that drew 10W for the CPU alone. The early Microsoft tablets had flopped, there was no middle ground asking for anything in between. I had some of the crappy early implementations of JavaME games, WAP surfing and it sucked real bad, that phones could be really useful wasn't very obvious until the iPhone in 2007. And back then Intel was very busy trying to beat back AMD with their Core processors, while AMD was trying to follow up the Athlons with their K10 arch.
Intel did bring out the Atoms in 2008, which were generally hated for performing so poorly but caught AMD between a rock and a hard place by undercutting their value offering and yet still were far, far too power hungry for mobile. With the cheap netbooks Intel probably thought they had Apple contained, besides Apple never went for the low end market right? Except Apple decided to sell a high-end botique tablet and despite costing as much as a laptop the iPad sold and sold big. So around 2010 some Intel execs go "uh-oh" and in 2012 the first Atom SoCs start showing up, that's roughly the lead time you need to bring up such a product.
Yes, in hindsight it's easy but back then... no, I thought the iPhone would be like iPod + phone, a decent music player that could do calls and texts that could kill off some phone manufacturers but that was it. I mean there were apps before the iPhone but they were expensive, crap and not very user friendly and I never expected that to become a big selling point. That an overgrown phone with 10" screen would become popular was also not on my radar. And even if I was an Intel exec and suspected, hitting those power levels, SoC design, mW idle states so early I wouldn't be playing catch-up to ARM would be near impossible.
That said, I don't think Intel is too late... there's been a few nice tablet/laptop hybrids that let you use the screen as a tablet or dock it to have a laptop, to me that kind of dual purpose is rather nice because for going mobile flexibility is also rather important, if I can cover both needs with one device there's less trade-off. I don't want a Microsoft phone though, but hey... I didn't think I'd ever want an Apple phone either but hell didn't freeze over so who knows what the future might bring.