Microsoft boss Steve Ballmer, who has announced he will be stepping down, admitted his company was too slow to react to the smartphone era.
The chief executive was talking to an audience of Wall Street investors and analysts.
He blamed a focus on developing its Windows operating system for letting mobile opportunities slip by.
However, he said the company now has significant opportunities in the market.
The firm has recently purchased the mobile phone unit of Nokia, a move that will allow it to speed up development on its Windows Phone platform.
The market is currently dominated by products from Apple, with its iPhone and iPad, and Google's Android platform which is used by many manufacturers such as Samsung and LG to power their devices
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Steve Ballmer's successor has not yet been announced
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