“During [the time that Apple was building the iPhone], Windows went through a difficult period where we had to shift a huge amount of our focus to security engineering,” said (Microsoft's) Mundie. “The criminal activity in cyberspace was growing dramatically ten years ago, and Microsoft was basically the only company that had enough volume for it to be a target. In part because of that, Windows Vista took a long time to be born.”
“We had a music player before the iPod,” he said. “We had a touch device before the iPad. And we were leading in the mobile phone space. So, it wasn’t for a lack of vision or technological foresight that we lost our leadership position. The problem was that we just didn’t give enough reinforcement to those products at the time that we were leading. Unfortunately, the company had some executional missteps, which occurred right at the time when Apple launched the iPhone. With that, we appeared to drop a generation behind.”
This has mostly been mocked as a lame excuse, and it is, but you're also going easy on Microsoft if you forget how completely and utterly they screwed the pooch on security, and you shouldn't underestimate the extent to which Apple's strategies are driven by security concerns. Security is a bigger driver for the App Store concept than getting a cut of all your $1.00 apps (although that cut is nice to have). Part of the reason all your iPhones are not part of a Russian botnet is sandboxing and other security features, but a lot of it is that they can review the code you can install on your phone and remotely disable it if the have to.
It is hard to imagine Microsoft getting away with that sort of thing in the first few years of the 20th century, so you can imagine how much their heads had to be spinning.