Bill Gates admits Microsoft's early mobile strategy was 'clearly a mistake'


Microsoft (NASDAQ:MSFT) co-founder and chairman Bill Gates admitted the company failed to execute on its early mobile strategy, calling its initial efforts to dominate the smartphone market "clearly a mistake."

During an interview with CBS This Morning's Charlie Rose, Gates acknowledged mounting media and investor criticism of Microsoft's mobile efforts, stating "There's a lot of things like cell phones where we didn't get out in the lead early. We didn't miss cell phones, but the way that we went about it didn't allow us to get the leadership." That strategy, Gates said, was "clearly a mistake," but he did not delve deeper into Microsoft's errors, indicating a full explanation would be "too complicated" for the broadcast segment being recorded.

Microsoft entered the mobile space in April 2000 with the release of its first Windows Mobile operating system. Despite expanding to mobile phones years before rivals like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG), Microsoft has fallen far behind them in the consumer consciousness: Windows Phone, which replaced Windows Mobile in 2010, currently powers just 2.9 percent of all smartphones in the U.S., far behind Google's Android at 53.4 percent and Apple's iOS at 36.3 percent, according to comScore data issued earlier this month.

Microsoft also has struggled to bring some of its signature products to rival mobile platforms. Last week, Morgan Stanley analyst Adam Holt estimated Microsoft is leaving billions of dollars on the table by not offering a full version of its Office productivity suite optimized for Apple's iPad. In a recent note to investors, Holt estimates that Microsoft sold fewer than 1 million Windows-based tablets in 2012 and will struggle to capture 10 percent of the tablet market this year; he also calculates that three to four times as many Mac users (between 30 and 40 percent) install paid versions of Office on their desktops as Windows PC users (10 to 15 percent) do.

Assuming a similar 30 percent adoption rate across an installed base of more than 200 million iPads, Holt estimates that Office for iPad priced at $60 would generate more than $2.5 billion in additional Microsoft revenues in 2014, even after Apple claims its standard 30 percent App Store sales cut. Sources say Microsoft and Apple remain at odds over sharing Office revenues, however, preventing iPad owners from accessing signature Office features like Word, PowerPoint and Excel on the go.

Asked whether he is happy with the performance of Microsoft CEO Steve Ballmer, who has held the position since early 2000, Gates declined to offer his unconditional support. "[Ballmer] and I are two of the most self-critical people you can imagine," Gates said. "There are a lot of amazing things that Steve's leadership got done with the company in the last year--Windows 8 is key to the future, the Surface computer. Bing--people are seeing is a better search product. But is it enough? No, he and I are not satisfied, in terms of breakthrough things, that we're doing everything possible."

For more:
- read this Guardian article
- read this Computerworld article

Related articles:
comScore: Windows Phone U.S. market share declines to 2.9 percent
Analyst: Microsoft forfeiting $2.5 billion a year by keeping Office off Apple's iPad
Report: Microsoft pressuring Apple to adjust revenue split on Office for iOS
Report: Microsoft balks at Apple fees, jeopardizing SkyDrive for iOS
Report: Microsoft Office apps coming to iOS, Android in early 2013
Microsoft reveals Office features coming to Windows Phone