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I find it strange that people think these large IT firms do anything without thinking about it and understanding all components of the decision.

The dominant IT OS in the world is Android.  Over 2B users.  Microsoft is not focused on OS's, otherwise, why is Linux the #1 server OS in Azure.  Microsoft is trying to help its customers and prospects be productive with their apps and platforms.  The CEO has moved the organization from focusing exclusively on Windows Centric View of the World to focus on applications, cloud, and other things.  The next version of the desktop OS for the PC will likely be Linux based.  Windows has made massive improvements over the years and is highly stable today, but moving to Linux eliminates any OS stability advantage Apple has today.  The war is not the OS, its apps and consumption of Azure for Microsoft.  By all accounts, they are crushing it today.  

It is clear that trying to shove a new OS into the phone market would be wasteful and not gain much in return for Microsoft, but leveraging an OS that dominates is a way back into the market.  Microsoft believes it has apps that are of value, and the market agrees.  Does anyone think that Apple's productivity apps are good? To me, they are basic and are not widely adopted.  Microsoft is better at Apps than Apple, so why not build and add value in your domain.  

Real innovation has been lacking from Apple in HW for some time in the notebook area.  I own a 2018 Macbook Pro with a keyboard that is a joke. I repeat, its a joke.  I use an external keyboard from Apple which is fantastic.  So, Apple is fallible in HW too.  Microsoft Surface devices are nice.  They are doing well in the market. Imagine a world with a rock-solid Linux based OS and innovation on the HW from Microsoft and the other providers.  That will keep costs down.  Apple can continue to cater to folks who want to pay more for an image and certain aspects of their products.  To me, the Macbook Pro is just put together in a simple and elegant way, and I like that and I'm willing to pay for that premium... today.  I feel the same about iPhones. Maybe someday I won't if Apple can't keep up on innovation and Microsoft has a super stable and secure OS.  Competition is good for consumers, as it keeps prices in check, and from a financial standpoint Apple has all their company's stock price and profit hinged on 1 product. iPhone. 70% of that is tied to the iPhone.  Microsofts profit is spread across a larger number of products and they are used to living off a smaller profit margin.  1 major misstep by Apple will tank the stock.  I don't see that happening, but I also don't think Apple has captured hearts and minds with their products like they did 10 years ago.  Apple is less of an aspirational product to own that it used to be.  They are still great and up there, but now people think of buying the new Samsung... gadgets also.

Microsoft will get their phone to the market and it will work. Now, will people buy it, I don't know, but the company is really performing well these days, so I trust they will get it correct, and they can also afford to play the long game if they want to stay in the market, which under Satya, I think they will. Does anyone think Tim Cook is inspirational?  Smart, efficient, effective, yes, but not inspirational. Satya is more in the mold of Jobs than Cook is.   

The next frontier will be glasses and Microsoft, with its Halo Lens line up will be in this market.  Once those devices hit, they will nip away at the value of a phone, and this hurts Apple the most.  Apple will deliver its product, but they don't own this space yet, so we shall see.  Beyond that, what will be next?  

Microsoft will be a dominant player in cloud and quantum computing, so they will be chasing revenue there, while Apple isn't a player in this space and can't buy in.  The ship left and it is a massive capital expensive market to make a gamble to jump in on.  Maybe the could buy someone else's cloud, but I don't see it.  

Both Apple and Microsoft are great companies and along with Google and Amazon are driving the stock market these days.