On one hand, I'm happy to see the Linux kernel being used in all sorts of consumer devices. It's a real victory for the developers and for the open source model. On the other hand, it has only been successful because it has enabled major corporations to fight the mobile platform wars. Linux hasn't succeeded on its own merits but as an economical way for companies to bootstrap their own products to fight for Apple's l…
Yes, there was a large group devoted to the linux desktop. They never really succeeded at large scale.
But there was also a large group devoted to linux in the embedded space fighting the likes of windriver, qnx, etc. A sub-branch of this was the realtime linux folks. In the embedded market linux is pretty widely used. Even in real-time. Not dominant, but no longer a "WTF" level competitor.
A different group was focused on taking the server world over, at the time a "serious server" was a Sun box runing Solaris or something from HP running HP-UX. Occasionally Irix was used. Lots of things were serving from Windows NT. These days server tends to mean "Linux box".
Related but different was the world of HPC - at the time the big computers were running all sorts of OSes, IRIX was pretty popular, as was Solaris, and other forms of unix. Similarly supercomputing and cluster computing was proprietary OSes, but linux wanted in there too. Now they mostly run linux.
The argument you are making at it's core is that the thousands of people and companies that use and contribute to linux have a single unified goal. This is not true, nor has it ever been. Well, I guess you could say the goal has been "make it useful for my case", and that is a truth, but generic enough to mean anything.
In fact I would say that other than the desktop, an arguably mobile, linux has pretty much dominated the fields it entered.
I say arguably mobile, because it is still questionable if Apple dominated for technical reasons or fad reasons. There are lots of people these days I talk to who say stuff like "I'm thinking my next phone won't be an iPhone". It remains to be seen what will happen.