it's pretty much a failure.
They misstepped with WinMo. Then they rebooted. Start your count over again.
The problem with consoles is that there's no brand loyalty (except for Nintendo). It only takes 1 bad console for an established player to vanish, and 1 good console for a newcomer to succeed.
Xbox live might be changing that, but it's still waayyy too early to call it either a success or failure. Though, certainly financially, it's been a small disaster so far.
[1]http://www.winsupersite.com/article/networking/time-running-...
But I don't think that's a very holistic viewpoint. Despite how terrible Windows Mobile was, it had a good hold of the market until the iPhone came along. It wasn't really a "failure" until it started declining in 2008. Microsoft's response, Windows Phone 7, was a complete reboot of their mobile line, and we have yet to see how it will perform in the long run.
By that metric, it's way too soon to call Microsoft's mobile execution a failure.