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Microsoft co-founder Bill Gates. (GeekWire Photo / Kevin Lisota)

The failure of Microsoft to establish a leading mobile operating system was a huge blow to the company, and something that apparently still haunts one of its co-founders to this day.

Microsoft co-founder Bill Gates said Monday that not developing the “dominant” mobile operating system prior to the spread of smartphones was one of his biggest mistakes at the helm. While Microsoft was working on a mobile platform, it was distracted by other issues and “didn’t assign the best people to do the work.” That allowed Android and Apple to jump in and become the dominant players of what became a revolutionary trend.

Here’s what Gates had to say on the topic at a speech at the Economic Club of Washington, D.C.:

We were in the field of doing operating systems for personal computers. We knew the mobile phone would be very popular and so we were doing what was called Windows Mobile. We missed being the dominating operating system by a very tiny amount. We were distracted during our antitrust trial. We didn’t assign the best people to do the work. It’s the biggest mistake I made in terms of something that was clearly within our skillset. We were clearly the company that should’ve achieved that and we didn’t.

Microsoft did build a Windows-based mobile operating system, but it failed to catch on widely. Microsoft spent years unwinding the division, including killing off the last vestiges of it earlier this year.

Under CEO Satya Nadella, Microsoft has experienced a resurgence from a down period earlier in the decade. Part of that transformation included ditching the struggling smartphone divisions and focusing on stronger businesses like cloud computing.

Microsoft has become the most-valuable U.S. company under Nadella, with a market capitalization of just over $1 trillion as of Monday. Gates said market cap is an imperfect way to measure a company’s success, but he asserted it would be much more valuable had it been able to become the dominant force in mobile.

“Microsoft would be far more valuable if we had won the mobile operating system competion,” Gates said. “Android is a huge asset for Google.”

Gates mentioned that the company was “distracted” by the anti-trust lawsuit the company faced in the early 2000s. The case centered on Microsoft’s move to bundle its Internet Explorer browser into Windows, undercutting rival Netscape in the process.

Gates said that the tech titans of today should be prepared for their own regulatory reckoning.

“There will be more regulation of the tech sector,” he said. “Things like privacy, and there should be, at some point, federal regulation that relates to that.”

He noted that some of Microsoft’s peers are taking lessons from the company’s battle with regulators.

“I, for the early years of Microsoft, bragged to people that I didn’t have an office in Washington D.C.,” he said. “Eventually, I came to regret that statement because it was almost like taunting Washington D.C. Now the technology companies, partly because of the lesson of Microsoft … they’re very engaged.”

Check out the video below for Gates’ full talk. The mobile OS discussion begins around the 36:30 mark, and regulation of tech comes up at around 1:01:30.

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