WinMo is suffering, yeah. Android is being used in devices that were originally to be WinMo phones (most infamously the new Motorolla Droid). Even within MS, the constant delays (late 2010 now) for the full WinMo7 release are causing a lot of disappointment.
Its pretty sad, too, as you would think MS would be easily able to leverage its computer and gaming presence into a very popular Smartphone experience (remember Live Anywhere, anyone?). What little info is out there is very hopeful, but will it be too little too late? And will it continue to be a financial drain on the EDD (we'll never really know how well the Xbox 'division' is doing . . .)? Who knows.
Shame, though.