I think Microsoft saw the problem well enough. They saw that computing was steadily moving over to mobile devices. But they could never come up with a device or operating system that gave developers and consumer any particular reason to move to their platform. They've been all but begging these days for people to develop apps for the Microsoft Store, but nobody cares, because it's irrelevant and who is going to waste their time?
So we're going to see them continue to leverage the things they do have dominance in; and that's Office/Back Office. They're going to have to play by Apple's and Google's rules, at least for now, but they need to keep MS-Office and Exchange as THE killer applications. They're still going to have their dominance on the PC, but whether that's going to maintain long term fortunes depends a lot on how the evolution of computers proceeds over the next 10-20 years.
All I know is that my smart phone has altered the way I compute. The bulk of my email correspondence is on my phone, and a lot of casual browsing goes on there as well. I still use a PC at work and have a laptop at home, and use them for coding, spreadsheet and word processing, but that's what they are, workhorses for those things that would be too hard on a phone, and if someone comes up with voice recognition good enough to do dictation, some of my word processing might end up on the phone as well.