You're talking about the biggest IT company which in 2006 was redesigning their whole big boy Windows. Ballmer was deriding the iPhone by not having a keyboard

You're talking about the biggest IT company which in 2006 was redesigning their whole big boy Windows. Ballmer was deriding the iPhone by not having a keyboard, therefore being just a gimmick not worth of being a work device. Plus, probably in 2007 having access a capacitive touch screens was most likely not so simple as today. The availability was limited. Plus, the apps were designed around having a physical keyboard and buttons available.