Of course he does: he can give away the new smartphone OS. It's not as if Microsoft has never given away software to win market share.
Microsoft cannot just take that market, but they can, and in time, probably will fight for it.
There's constraints of display/keyboard size, and the form-factor encourgaes different usages (eg. less business software).
But I think people might start to dock their smartphones to large displays and keyboards at home (that's what I do with my netbook) - like a portable harddrive. Projectors might also become popular, giving a large portable display.
Or, future desktops might actually be smartphone components, wrapped in a desktop package (in the way microcomputers invaded the workstation, minicomputer and mainframe markets).