Microsoft was confused in making a split between tablet and phone in a world where no one else really does. Android is Android -- applications are designed to run on phone when on a phone and tablets when on a tablet. Apple does have tablet-only apps, but also runs every phone app on their tablet and allows apps that work on both in the native mode of each.
For consumers, that's about costs and consistency -- same stuff on both devices, only buy it once. For developers, that's about one coding effort and one binary rather than multiple. Both are against Microsoft, and it doesn't help that they had basically no market presence in mobile anyway. And what they might have had was largely self-destrusted by the Windows Phone 7 fiasco (non-upgradeable hardware and a dead-end API).
Microsoft also kind of torpedoed themselves on apps. With very little market, they paid select major app companies to do ports of some popular apps. Those companies, expecting little actual income, look at the Microsoft funding as their complete pay-off for those applications. They don't do much in the way of updates, and that one app doesn't lead to another -- they're waiting for a Microsoft check for that next one, too. And those major companies in there keeps the sort of smaller companies -- the kind that built both iOS and Android markets into their current juggernaut positions -- from feeling safe about entering the Windows mobile market.