(1) If Apple pursues massive mainstream success, it will alienate its traditional supporters, because not everyone in the mainstream values design so highly - some value cheap, performance, convenience or utility etc at the cost of design. Sure, sometimes you can have everything, and sometimes there's a trade-off (fast-cheap-good-pick-two).

(2) Ballmer is right that the iPhone cannot handle all webpages as well as a desktop - it's just impossible to shrink the power of a desktop into such a small, light and elegant form-factor (today, anyway). This is not a fault of the iPhone, but a shortcoming of the web with its layers of inefficiency (esp javascript, flash, java). Apple's genius was to strip those layers away, by integrating the hardware and software to work well together. Only Apple has enough expertise and market clout to do both, and to do it brilliantly.

But the above foreshadows dark days ahead: what will happen to the iPhone when it is possible to have a desktop in that form-factor? When ingenious integration is no longer required, and an open market is favoured, with mix and match, and webapps and so on? I see two ways for Apple to win:

i. Apple uses the new technology to move ahead to the next frontier (because that's where they like to be). Perhaps an even tinier form-factor?

ii. Apple has become so established as the leader in this category, that no one can catch up. This is within Apple's grasp, but I believe they will not take it, because taking it would involve pleasing the mainstream (if you leave major market segments unsatisfied, a competitor fills them), and, as Mr Fireball implies, if Apple did so, it would no longer be Apple.

But Microsoft.