That's almost word for word what people said about Windows Phone when I was at Microsoft.
Additionally, Microsoft didn't really have any advantage in the smart phone space.
Google is already a product the majority of people on the planet use regularly to answer questions.
That seems like a competitive advantage to me.
I think people just have rose-tinted glasses on. Sure the hardware from Nokia was great, but software was very poor even by the standards of that time.
By his own admission, Gates was extremely distracted at the time by the antitrust cases in Europe, and he let the initiative die.