But it WAS too expensive. The fact that the iPhone price dropped within two months of it being introduced is proof of that. And you have to remember, that most touch phones sucked at the time, and they ALL sucked if they didn't have a stylus, and it was a really, really, big deal to have an all touch interface that truly worked.

And, it wasn't as if Microsoft didn't have a mobile OS. Windows Mobile always worked decently, but never was just truly great. And it never focused on being just for phones. It was adaptable to any type of mobile environments, like Android is trying to do right now.

It is also more difficult to implement new technologies on top of old ones, which was Microsoft's first choice when they tried to make the phone part of Windows Mobile more modern, until they realized that that house of cards wouldn't stand. Then they did a rewrite of, which lead to Windows 7.

So, from Microsoft's point of view, it was a limited phone, that had no way of adding apps, no business functionality, no keyboard for typing, no true enterprise security, and for a whole lot of money, only available on AT&T. I too thought that the original iPhone wasn't that great, only marginally better than the ROKR E1, functionality-wise. Though, I did think that that original iPhone screen was truly awesome.

So, let's not come down to, to hard on Balmer for not recognizing the iPhone at first for the threat it came to be.