"There's a ton of innovation going on in this space," said Bach, president of Microsoft's entertainment and devices unit. "They've made an announcement, now they have a product that they need to come and deliver."
But nothing in Google's plans was a surprise, Bach insisted. "It's a different direction than we are going, but it's one we can compete effectively with," he said. "When they bring a phone to market, we'll be happy and ready to compete."
He noted that the market for phones with significant operating systems has broadened from just a business market into a mainstream category, spanning devices that are both consumer and corporate as well as hitting all age groups.
"The good news is that makes it a very large market," he said. "We just have to figure out and focus on the target audiences that matter the most.
I asked whether Windows Mobile, which grew up as an operating system for handheld computers, can continue along its evolutionary path or if Microsoft needs a more radical overhaul to compete. Not surprisingly, he insisted Windows Mobile was up to the task.
"I think Windows Mobile is quite flexible in terms of what we can bring to market using that architecture," he said, pointing to the recently introduced T-Mobile Shadow as an example of a device that is now possible with Windows Mobile but would not have been even a year or two ago.