Microsoft Corp's biggest "screw-ups" happen when the software maker fails to predict changes in the technology industry, such as the growth of Internet advertising, Bill Gates said.
"In software, you've got to anticipate the turns in the road," Gates said. "We missed the search and advertising thing - the way that's grown up to be so important."
Gates stepped down last Friday from his day-to-day role at Microsoft, the company he co-founded in 1975 and turned into the world's biggest software maker. Chief Executive Officer Steve Ballmer now faces the challenge of catching up with Google Inc in online advertising, a market that research firm IDC says will reach US$65.2 billion worldwide this year.
At a meeting with about 800 employees, Gates and Ballmer reflected on the day they met and their careers at Redmond, Washington-based Microsoft.
The pair were introduced through a mutual friend at Harvard College and went to see a double feature of "Singing in the Rain" and "A Clockwork Orange," Ballmer said. He presented Gates with a scrapbook for his retirement and both men teared up.
After starting Microsoft, Gates persuaded Ballmer to drop out of business school at Stanford University. The two haggled over whether Ballmer would be paid US$40,000 or US$50,000.
"We split the difference," Ballmer said. As of September last year, he owned stock valued at US$11.6 billion, Bloomberg News said.
Marc McDonald, who joined Microsoft as its first employee, recalled going dumpster diving with Gates for computer manuals while they learned to write software at high school.
McDonald, who started at US$8.50 an hour, left the company in 1984 and returned 17 years later when Microsoft bought the business he was working at.