In an interview during an event hosted by venture capital firm Village Global, Gates revealed that the mistake was to allow Google to develop Android and not creating a profitable model themselves, reports TechCrunch.
"In the software world, particularly for platforms, these are winner-take-all markets. So 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," Gates told Eventbrite cofounder and CEO Julia Hartz.
"If you're there with half as many apps or 90 per cent 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? $400 billion that would be transferred from company G (Google) to company M (Microsoft)," he emphasized.
Google acquired Android for just $50 million in 2005. The original iPhone came out in 2007 and the first Android device was released in 2008.
Android today has 85 per cent of the smartphone OS market and Microsoft Windows OS-based devices are nowhere to be seen.
Microsoft has asked its users to switch to an Android or iOS device as it announced the end of support for Windows 10 Mobile.
The company told users that Windows 10 Mobile will stop receiving new security updates after December 10.
Gates stepped down as the CEO in 2000 and as Chief Software Architect in 2008. Satya Nadella took over as the company's CEO in 2014.
( With inputs from IANS )