Let's change that slightly: Apple is not scared of Windows Phone 7, nor is Google. They took note, and they are not even slightly worried.
That's how high we raise the bar for products from Microsoft nowadays: Does it suck, or does it not such? iPhone haters (and probably Android haters as well) rarely go beyond "but it is not revolutionary!". Wake me up when Microsoft has a product that doesn't only not suck, but that is actually new, fresh and exciting.
Who to? As an unproven entitity, it has to beat the iPhone according to Apple lovers, and it has to beat Android according to Android lovers. If it doesn't do either, and I can't see it, then it's history already.
People didn't buy the Zune because Apple was bigger? Excuse me, but if the Zune hadn't been hyped to heaven by the last remaining Microsoft fans, nobody would have ever taken _any_ notice of it. Don't compare the Zune to the iPod. Compare it to what Samsung offers, or Sony, or Creative, and it is just not up there with any of them. The only thing the Zune proved is that the name "Microsoft" doesn't sell consumer electronics except to a tiny minority.
DevelopersDevelopersDevelopersDevelopers develop for the iPhone, and if they don't, they develop for Android and RIM. Who would want to waste development time on the Windows Phone?