Lumia has never had a hardware deficiency; the problems have always been the software. People want to buy phones that can do things that their friends’ phones can do. And when Lumia can’t do Snapchat (officially), has limited functionality in Instagram (still in beta), apps don’t that get updated, apps that take 2-3 years to make it over from iOS (if ever)…
Microsoft is probably planning a Surface Phone. It will probably have great hardware. It will probably have a beautiful, premium design. It will probably be surprisingly affordable despite this.
In the end, though, it probably won't change anything for Microsoft's mobile efforts. It won't fundamentally solve the app gap problem. Nokia slogged away for years with surprisingly affordable phones, with great hardware and design, and the powerful Lumia brand. They still failed
No market share means no apps, which mean no sales and thus no market share growth, in a vicious cycle with no end in sight. This is the reason multiple players with significant market share don't tend to emerge in two-horse markets, as smartphones are fast becoming.