Ballmer was not wrong about the iPhone. He said they would get 2-3% of the total phone market , not the smartphone market. He even makes that clear in the part that Gruber quoted: "... 1.3 billion phones ...". That's phones, not smartphones. According to http://www.zdnet.com/blog/btl/apple-iphone-smartphone-market... in the first quarter of 2010 Apple had 16.1% of smartphones and smartphones were 18.8% of mobile phon…
Perhaps Ballmer did get the right answer, after all. But was he asking the right question?
It was and is obvious that at some point all phones will be what we call smartphones now. I think Ballmer's point is that even when that happens, the iPhone will not be able to sustain its 16%. It will still have insignificant market share.
Android will not, though. It might get "60 percent or 70 percent or 80 percent", and that's the share that Ballmer would have preferred run Windows.
So yes, I think Ballmer asked the right question and got the right answer. He just doesn't have any way to respond to Android.