Even if the iPhone delivered much more than what was already available on Windows Mobile (doubtful, considering that Microsoft's software was years of development ahead, functionality-wise), it's still incomprehensible to me why a company as massively experienced as Microsoft did not react as quickly as possible by copying iPhone features to improve Windows Mobile, but instead delayed their time-to-market for years by going the Windows Phone route.

Probably, it was not Apple's ingenuity that won the battle, but Microsoft's stupidity not to improve their product ASAP that lost the battle.