Will Microsoft continue to get “smoked” by Apple? Was iTunes only the beginning?

According to some emails turned over by Microsoft during an investigation into antitrust action, Microsoft was in awe of the deals Apple’s Steve Jobs worked to create iTunes. Emails from the big man himself, Bill Gates, to his team revealed his amazement and his teams response, “we got smoked.”

Clarke’s law says, “any sufficiently advanced technology is indistinguishable from magic.” Apple uses this idea again and again in introducing new products. The idea that they have ventured so far into the land of innovation and have brought back something that will make all our lives better is consistently rolled out for big things like the iPhone and iPad. Apple did this in 2003 with iTunes and Microsoft knew it the minute they heard it.

Gates saw some of this magic when he wrote, “This time somehow he (Steve Jobs) has applied his talents in getting a better Licensing deal than anyone else has gotten for music.This is very strange to me.” Gates goes on to point out how everyone else, including Microsoft, emusic, Real and others bet on the wrong horse. Jobs was able to walk away with the best deal and got his team to get the UI “right and market things as revolutionary are amazing things.”

You’ve got to give Microsoft some credit for recognizing the juggernaut that is iTunes out of the gate. Despite being “flat-footed”, as Gates put it, the team was charged with finding a competitive match and fast: “we need to move fast to get something where the UI and Rights are as good.”

These emails come to light on the backside of a New York Times Op Ed piece on how Microsoft is no longer an innovator. Microsoft could have never introduced something as innovative as the iPhone or iPad. The piece posits why has Microsoft stop bringing us things from the future? These Microsoft email show the company doesn’t lack business savvy folks that can’t see the forest through the trees, they just don’t seem to have a compass to navigate.

Read: [Groklaw] via [CNET]