Microsoft co-founder Bill Gates recently gave a wide-ranging interview to VC firm Village Global, and at one point, the topic of mobile came up. Gates revealed his biggest regret while at Microsoft was a failure to lead Microsoft into a solid position in the smartphone wars.
In the software world—particularly for platforms—these are winner-take-all markets.
So, you know, the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is. That is, Android is the standard non-Apple phone platform. That was a natural thing for Microsoft to win, and you know it really is winner-take-all. If you’re there with half as many apps or 90 percent as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system. And what’s that worth? Four hundred billion? That would be transferred from Company G to Company M. And it’s amazing to me having made one of the greatest mistakes of all time—and there was this antitrust lawsuit and various things—our other assets—Windows, Office—are still very strong. So we are leading company. If we’d got that one right, we would be leading company. But oh well.
In the interview, Gates takes full responsibility for not reacting to the new era of smartphones. But by that time, he already had a foot out the door at Microsoft to focus on the Bill & Melinda Gates Foundation. The original iPhone came out in 2007, and the first Android device was released in 2008. Gates had already announced his transition plan in June 2006.
The CEO of Microsoft at the time was Steve Ballmer, who famously laughed at the iPhone and called the $500 device “The most expensive phone in the world” while deriding its lack of a hardware keyboard. “There’s no chance that the iPhone is going to get any significant market share,” Ballmer once told USA Today. “No chance.”
Apple went on to sell over 2 billion iPhones.
The launch of the iPhone was a huge inflection point in the tech landscape, and the way companies reacted to it would shape their fortune for years to come. Unlike Microsoft, Google took the iPhone seriously. Google was investing in mobile before the iPhone was announced, having acquired Andy Rubin’s Android, Inc. in 2005. The team was working on a Blackberry-style OS, but once the iPhone was announced, Google’s mobile division realized it would need to “start over” on an all-touch interface in response. This decision eventually led to the launch of Android 1.0.
A report from The Atlantic details Rubin’s reaction to the iPhone launch, which was the polar opposite of Ballmer. “Rubin was so astonished by what Jobs was unveiling that, on his way to a meeting, he had his driver pull over so that he could finish watching the webcast.
“Holy crap,” he said to one of his colleagues in the car. “I guess we’re not going to ship phone.”
Microsoft would eventually take on the iPhone and Android with Windows Phone, but its slow response and failure to recognize the modern smartphone revolution meant Windows Phone would only launch in late 2010. By then, it was too late. Google was throwing an unprecedented amount of resources behind its mobile efforts and, by 2010, had grown too powerful, with something like six major releases of Android and a suite of killer apps like Gmail, Search, YouTube, and Google Maps. Microsoft could build an OS, but it couldn’t compete with Google’s services. The Windows Phone was killed by the app gap.