Satya Nadella: 'We clearly missed the mobile phone'

LAGUNA BEACH, California — Microsoft may have missed out on mobile but CEO Satya Nadella says his company won't make the same mistake with augmented reality and virtual reality.

Speaking Monday at the opening dinner for the Wall Street Street Journal's WSJD Live conference, Microsoft's top executive said there was "no question" the company had missed its opportunity when it comes to mobile.

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"We clearly missed the mobile phone, there's no question," Nadella said. "Our goal now is to make sure we grow new categories."

Chief among those new categories are augmented and virtual reality, both of which the CEO says he sees as big opportunities for future growth. 

Still, Microsoft isn't completely out of the phone business yet — Windows Phone accounts for less than 1 percent of the smartphone market worldwide —  and Nadella said that he sees Microsoft's role as one where the company can provide niche value. He referenced the company's Continuum feature, which allows phones with Windows 10 to act as a PC when connected to a display.

"We have devices which are phones today but the place where we are focused on, given where the market is, is what is the unique thing that our phone can do. We have a phone that in fact can replace your PC, the same way we have a tablet that can replace your laptop. Those are the categories that we want to go create."

Nadella said he is always trying stay "in the hunt for the next high volume category," which is where he sees potential for virtual reality and augmented reality. Hololens, he said, could be the beginning of an "ultimate computer" based on mixed reality.

New technologies like augmented reality will be increasingly important for the company, he said, as it will help diversify Microsoft's dependance on the PCs alone.

"If anything, the lesson learned for us, was thinking of PC as the hub for all things for all time to come. It was perhaps one for the bigger mistakes we made."

Nadella's remarks come just days before an event where Microsoft is expected to show off new hardware where we'll no doubt hear more about Nadella's vision for the company's hardware business.