Everyone who thinks Microsoft can't turn things around with Windows Phone needs to look at the bigger picture. Windows 8 (PC) and Windows Phone 8 are coming out next month, and Microsoft is going full force with integrating the two OS's; they're bringing native cloud support via SkyDrive, with cross-compatible apps and games. Complete integration is the key here. It's like iOS and Mac OS X all over again.
And there have been plenty of instances where a product (or company) that was deemed unsaveable managed to turn around and become a success. See Apple, the PS3, and the Xbox brand, for instance.
- Apple was on the verge of death before Steve Jobs returned to head the company. When they released the iMac and iPod, the company's fortunes, marketshare, and profits improved dramatically.
- The PS3 was being shunned by developers and gamers due to it's high launch price, and it took the redesigned PS3 Slim and a new $400 price to improve its sales.
- The original Xbox was a niche console with a small, yet dedicated fanbase. Xbox Live and Halo kept it alive during it's relatively short 4 1/2 year lifespan. Luckily, Microsoft had the money to burn, and they managed to turn things around with the Xbox 360, which became the de-facto standard for console developers.