It wouldn't and it wouldn't need to. The decision was still very likely wrong, especially transparent after Apple proved with silicon that ARM platforms can be that competitive. Windows wasn't ready here and platform interop wasn't at all it strength.
If Windows phones would have had an emulated x86 mode, many people would have bought it instantly due to the momentum that now steadily decreases.
There can be solid business revenue if you are "just" #3 and the experience with development is very valuable. Although it is true that Microsoft and hardware has always been turbulent, with partners or without. Sometimes they simply created the best products in their class with a lot of margin, sometimes they basically sold scrap.
The entire mobile market was immature back then, people didn't expect much interoperability and Windows Mobile 7 Nokias were slick and faster than iPhone or Android. They could have become the "contrarians luxury" if you didn't want to just get an iPhone. A bunch of hardcore Microsoft fan developers were gearing up to develop for Windows Mobilet dotnet when Microsoft changed the APIs with Mobile 8 (IIRC) and this dedicated bunch of developers just dropped the platform and just embraced Android or iOS instead.
Just a spitball idea, but rather than focusing on the consumer market, they could've been the new blackberry for businesses (that give employees phones). Native active directory and group policy integration would be a good solution for the myriad of third party apps/services/devices that attempt to control the other phones.
For sure. Enterprise mobile was not really a thing back then. (Laptops with VPN was state of the art.) Microsoft could have organically owned the enterprise mobile market but chose not to.
You also need a plan. How would Windows Phone displace either Apple or Android?