Much of what was said is shrouded under non-disclosure, but let me skirt the fringes of the Official Secrets Act a la Microsoft.
The success of 3Com's Palm Pilot and its rival, the Handspring, in the face of Windows CE devices is a source of irritation for Microsoft. After all, the Palm Pilot lacks a GUI, until recently was only monochrome, and finds customers through personal recommendation. The idea that one could want a pocket-sized device that didn't run Windows productivity apps is hard to comprehend if you work for the Windows CE team.
And then someone said: "What if we split product development. Digital technologies are converging and with our partners, we could develop a Windows-driven mobile device. One kind for Enterprise Road Warriors, and a second consumer-focused device, that brings music, Mpeg video, e-mail, e-books, and the Web together in a unit the size of a cigarette pack."
You see, Microsoft's problem lay with its insistence on trying to shoehorn Windows into any device. It lost sight of whether it was innovating or maintaining and growing market share. Maybe this time it will be different.