Windows Mobile may have been a horrible OS, but at the time the main competition was not iOS type devices, but Palm Pilot, Psion/Symbian and the like, and the devices of the time - regardless of OS - were horribly hampered by hardware (I spent '99 working on a tablet running Linux - we got something halfway decent for the time, but imagine a tablet with resistive touch-screen, 486 level cpu and 32MB RAM, at the cost of an iPad).
I agree that if they'd tried to enter that market from scratch after the iPhone, with Windows Mobile, they'd still have problems. But at that time, Windows Mobile did not look all that bad for the market "everyone" were targeting, and the competing OS's were abysmal abominations to work with (I spent '98 in part working on an app for Palm Pilot; I'm still trying to forget the memory management horrors)
I agree that if they'd tried to enter that market from scratch after the iPhone, with Windows Mobile, they'd still have problems. But at that time, Windows Mobile did not look all that bad for the market "everyone" were targeting, and the competing OS's were abysmal abominations to work with (I spent '98 in part working on an app for Palm Pilot; I'm still trying to forget the memory management horrors)