I speak with people in the industry all the time. As soon as we talk about Windows Phone, the best comment I hear is "they are dead". I spare you the rest of the comments ;-)
I disagree. I know I am the most unlikely believer in Microsoft, due to my open source background and extensive use of anything non-Microsoft, but here you have my five reasons why you should not discount Windows Phone.
1. Android is getting too dangerous for device manufacturers. I have said many times that the war between Apple and Google reminds me of Microsoft vs. Apple in the PC era. It turns out that Google is winning and has a high probability of becoming the Microsoft of mobile OS, with Apple becoming the Apple (i.e. repeating the mistake they made years ago, with the slight difference that they are making tons of money now ;-) The industry is scared by Google now, more than by Apple and a million times more than by Microsoft. They have seen the PC world and do not want it to repeat. Nobody must own 90% of the market, relegating them to pure boxes makers. Apple is not an option (they do not want help), Microsoft is the only weapon to slow down Google. Windows Phone will get a lot of support and love because of it.
2. Android is getting expensive for device manufacturers. The news of today is that HTC is paying $5 per device to Microsoft, for every Android device. You read it well, for Android... Microsoft is actually making more money from Android than from Windows Phone, due to Intellectual Property BS (a tactic they use it very well, and have no intention of abandoning). ODMs flocked to Android because it was free. If Microsoft lowers the price of WP below $10 and Google keeps increasing the cost of their proprietary add-ons, the field will be leveled on price. At the same price point, splitting production between Android and Windows Phone seems reasonable.
3. Android is less and less open. Because of fragmentation, and some confusion in Google on how to monetize it with advertising (any hint why they are still pushing Google Chrome OS? Yep, that fits very well with the ads play, Android does not). Android becoming close makes it equal to Windows Phone. Same price, same openness, less risky player: ODMs will just do it.
4. Windows Phone is a good consumer OS. If you look at the three points above, it was all about device manufacturers picking one OS vs. the other. However, the king-makers are the end users. If they believe WP sucks, it is game over. However, the (few) people I know with a WP are very happy about it. It looks different. And cool. Even non-Microsoft. It is on par with Android, and it some ways even better. Android still looks too geeky. Windows Phone is everything but. Eventually, it will start to sell.
5. Nokia still enjoys a huge market share. In particular in feature phones and emerging markets. Right now, people upgrading their Nokia phones are buying Android devices. As soon as Nokia has a decent smartphone, they will prefer to stick with the brand they trust and like (Nokia phones do not break, they might not be sexy anymore, but they are reliable. Reliability sells, if you spice it up a bit). Nokia must move fast, because every day they lose is a day of more upgrades to Android. They will ship a WP device, eventually. It is just a matter of time.
The missing element is convincing developers (we hate Microsoft by definition), but if ODMs build good devices and users start buying them, eventually we'll port our software to it.
Here you have it. I believe Microsoft could make it. Nothing close to domination, but a significant market share. Something between 20% and 30% in three years. Wanna bet?