"The overall mobile market is where the real growth will be over the next three to five years, and the iPhone and Android smartphones have a huge market lead," Bajarin says.

Additionally, the early death in July of the Microsoft-branded Kin flip-phones aimed at teenagers led to negative perceptions about Microsoft's mobile acumen — perceptions that are still hurting Window Phone 7, says veteran tech analyst Rob Enderle.

"The Kins had massively overpriced data plans and because they were branded 'Microsoft,' cellphone partners that otherwise might have been more aggressive with Windows Phone 7 were scared away from the platform," says Enderle.

"It was a massive belly flop on a large stage with everyone watching."

Shane O'Neill covers Microsoft, Windows, Operating Systems, Productivity Apps and Online Services for CIO.com. Follow Shane on Twitter @smoneill. Follow everything from CIO.com on Twitter @CIOonline. Email Shane at soneill@cxo.com.