Microsoft was not looking to make a Phone a PC
I worked at Microsoft from 2004-2005. This was before the iPhone or Android phones. Most people had flip-phones. If you wanted a smart phone, you either got a Blackberry or a Windows phone. Those were the most advanced phones on the market. They were around years before Apple thought of getting into the phone business.
Keep in mind that Microsoft mainly earns its money through the sales of Windows and Office. So, every product they make is engineered to drive the sales of those two products. One of the initial groups I interviewed with at Microsoft were the guys making the Windows phones. (No, I didn't end up working with this group.)
Yes, they absolutely were attempting to bring the Windows PC experience to the phone. And yes, that was a disaster.
The problem was that tiny screens don't work well with a Windows type of interface. Users don't like the clutter. Microsoft needed to make the interface transparent and focus on what people actually wanted to do with their phones, which is use applications.
Hiding the Windows interface doesn't work when you're attempting to promote Windows. Marketing which promotes "Windows on your phone!" doesn't sell phones. I remember thinking during my interview, "what does Windows on my phone actually get me? Why would I want that?" Microsoft itself couldn't adequately answer that question until the iPhone and Android came out and focused on the apps. Even then, Microsoft still screwed up their answer to the iPhone and Android. They simply can't get away from promoting Windows and Office.