In its first full quarter of sales, the iPhone exceeded the marketshare of Microsoft's entire lineup of Windows Mobile smartphones in North America. That's HUGE. Despite Microsoft's massive head start, years of smartphones sold, they were overtaken in a single quarter. You could easily call that "total failure" without it being a huge hyperbole.
That still only transfers to a market where people are used to lockins. In Europe the Apple iPhone lockins make it a lot less sexy.
I'm not saying it's a phone which can be ignored entirely, but the truth is that I still see Windows Mobile smart-phones everywhere having a hard time seeing anything else. Hence calling Windows mobile a complete failure seems like a rather narrow look at things which has no basis in reality.
Add to this that basically every brand of phone sold here except for the iPhone comes with any carrier and any plan you like, and the iPhone has serious hurdles it needs to overcome to be a viable alternative to most people here.