Microsoft CEO Ballmer Acknowledges Smartphone Mistakes

Microsoft CEO Steve Ballmer used a June 3 talk at the D8 Conference to acknowledge that his company had made missteps in the smartphone space, where it lags behind fierce competitors such as the Apple iPhone and a growing number of devices powered by Google Android. However, Ballmer suggested that the dynamic nature of the smartphone space presents an opening for Microsoft to become a more serious competitor. Microsoft plans on launching its smartphone operating-system revamp, Windows Phone 7, at some point before the end of 2010.

Microsoft CEO Steve Ballmer used the platform of the D8 Conference on June 3 to acknowledge his company's missteps in the smartphone space, as well as the strength of competitors such as Apple's iPhone and the ever-increasing number of Android-powered devices.

A full blow-by-blow of that conversation can be found on this Website, although it lacks the accuracy of a polished transcript.

"We were ahead of this game, and now we find ourselves No. 5 in the market," Ballmer told The Wall Street Journal's Walt Mossberg during an onstage question-and-answer session. "We missed a whole cycle. I've been quite public about the fact that I've made some changes in leadership around our Windows Phone software. We had to do a little cleanup."

Nonetheless, Ballmer tried to paint the smartphone market as one in continual flux, offering his company opportunities as it prepares to launch Windows Phone 7, a revamp of its smartphone operating-system franchise, at an as-yet-unannounced point in 2010.

"We're driving forward in the phone business," Ballmer said. "But this is a very dynamic business, the market leaders here have shifted over twice in the past few years ... so we've got to have real ideas and we've got to execute consistently."

As part of Microsoft's renewed push into the mobile space, the company recently released a pair of phones, the Kin One and Kin Two, aimed at a younger demographic. Both devices have been optimized for social networking, and allow multimedia such as photos to be quickly uploaded to the cloud. While touted by many analysts as an early indicator of Microsoft's ability to conceive and execute a wide-ranging plan for a mobile product, the company has not yet released sales figures for the Kins' first few weeks on the market.

Nonetheless, Ballmer acknowledged that other competitors have managed to corner a substantial portion of the mobile market. First he mentioned Research In Motion, maker of BlackBerry, as "obviously a good competitor" but less robust as a "general-purpose tech platform" than its competitors. But Ballmer seemed to reserve most of his comments for Apple and Google, which have made substantial inroads into the consumer smartphone arena.

"They've done a good job of coming from nowhere a few years ago," Ballmer said about Apple. "They've done their best job on the browser. People focus on the apps, but the browser is really the thing that has distinguished their phones from others."

Meanwhile, "Android's a real competitor," Ballmer acknowledged, but also exhibited confusion about Google's chances in the tablet PC market, where Android will be ported onto a handful of manufacturers' offerings. "On the larger screen devices, who knows? I don't know that these Android-based things will matter. ... I don't really understand why Google has two different operating systems."

Ballmer was accompanied for his D8 discussion by Microsoft Chief Software Architect Ray Ozzie, who participated in a wider-ranging discussion about tablets and Microsoft's entrance into the cloud. Ozzie suggested that, despite the rise of smartphones and similar mobile devices such as tablets, there would always be room for a diversity of form factors.

"I think there's going to be success in a number of form factors-in the pad form factor, in the tablet mode. I think there will be appliancelike screens that will be in our living rooms," Ozzie said. "There are certain fundamental differences in productivity in consumption and creation experiences, though. Both must exist on these devices."