I actually think the *way* MSFT killed Palm was the problem.
Palm provided exactly what a lot of people wanted 12 years ago: great battery life, an intuitive touch screen interface, and a closed but well-functioning set of standard programs.
Microsoft came in and made your PDA feel like a desktop. They increased Palm Pilot's CPU speed 10-fold, but replaced the lightweight OS with a monster so everything felt slower. Everything became less stable, and the battery life went down to less than a day. Still, people bought it because it felt more like a computer in your pocket.
I believe this has been the unfortunate path of mobile devices since, until Apple reverted everything. The iPhone was built on the same principles that made Palm great: a controlled environment, simple interface, and lightweight but functional built-in applications that are highly integrated with each other.