As far as I know they started the Smartphone market. I had a Windows Mobile Smartphone 5 years ago that had fairly high speed CDMA internet, tethering, and quite a few handy applications (the HTC Apache). There were models around some years before that too.
The problem is, they had this massive lead over everyone else, but they were completely apathetic towards their own product. There were no great first party applications, and there was no organized way to find applications for the phone (not advocating a singular market entity, but having no means at all to find applications isn't good either). They also didn't market it to anybody. The only people who even knew were the ones who went looking for the capabilities on their own. The only company who wasn't completely apathetic towards the market was HTC, who went through a lot of trouble to make Windows Mobile usable, and later to even make it look nice.
Now Microsoft is completely shooting themselves in the face with Windows Mobile 7 - no backwards compatibility, no multi-tasking, no UI changes (and a bad looking UI from shots so far)... what the hell? So upgrading to a new Windows Mobile phone in the near future means I'm starting over from scratch?
I went ahead and switched to Android, though I stayed with HTC.
I do hope that Microsoft gets around to making a nice portable version of Office though, and that they have the decency to port it to all platforms (or at least Android, Documents To Go kind of sucks).