In other words, he was unable to anticipate that Apple would be able reduce the price of the iPhone, like they did with the iPod?
Microsoft squandered their lead in smartphones, you can blame them and Ballmer for that, but the particular video people love to continuously bring up has nothing to do with where MS made mistakes.
I think this video very clearly shows how Ballmer managed to not take the iPhone seriously, and that has everything to do with why Microsoft made mistakes and were slow to respond from 2007 onwards. The same thing happened with the iPad as well. From everyting he said, you could see that he regarded them as toys.