no, Windows Mobile was a horrible os, that's all.They tried to port a desktop ui to mobile,it sucked , then they tried to port a mobile ui to desktop(metro), it still sucked. The problem is Microsoft itself,nothing else.
I agree that if they'd tried to enter that market from scratch after the iPhone, with Windows Mobile, they'd still have problems. But at that time, Windows Mobile did not look all that bad for the market "everyone" were targeting, and the competing OS's were abysmal abominations to work with (I spent '98 in part working on an app for Palm Pilot; I'm still trying to forget the memory management horrors)
The fact that you're referring to it by its late name, rather than the early ones (WinCE / PocketPC) I think is indicative of your perspective. Early WinCE competed with Palm and (what would have become) Symbian; because of incredibly low-res screens, people were supposed to use stylus pens. There was little research on usability of mobile devices to build on. Devices were terribly underpowered, memory was much more expensive.
Believe me, for the times, a (colorscreen!) PocketPC device was not as terrible as you think, considering overall constraints. This was almost a decade before iOS.
Actually, MS was quite a pioneer in the mobile space. Their mistakes were in execution (they went after pricy enterprise tools like PDAs rather than consumer-grade phones) and timing (technology simply wasn't ready -- they made a big push on early tablets before capacitive touchscreens changed the whole landscape). Gates could see where things were going, he wasn't "distracted"; he bailed on MS when when it was just about clear that the company wasn't running towards new markets as fast as it should have.