Steve Ballmer explains his biggest mistake when it came to the iPhone

Microsoft Chairman Bill Gates, left, and CEO Steve Ballmer speak to each other at the annual stockholders meeting in Bellevue, Washington, November 9, 2004.
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Former Microsoft CEO Steve Ballmer said he made a big mistake when he claimed that the iPhone wouldn't sell because it cost too much.

In an interview with Bloomberg, Ballmer said he didn't understand at the time how mobile carrier subsidies would make the iPhone affordable.

"I wish I'd thought about the model of subsidizing phones through the operators," he told Bloomberg. "And there was business model innovation by Apple to get it essentially built into the monthly cell phone bill," Ballmer said.

Ballmer also said his commitment for the company to make its own handsets and tablets aided in the breakup with his friend, company co-founder Bill Gates.

Ballmer, Microsoft's CEO from 2000 to 2014, told Bloomberg recently that the tech company got into the hardware business too late and, when it did, Gates and other board members disapproved due to differences in strategic direction. Afterwards, Ballmer and Gates "drifted apart," according to the report.

The former executive said he had pushed the board for support with its Surface RT, Microsoft's first-generation hybrid tablet computer. When the device didn't do too well, Ballmer said the mistake was waiting too long, according to the report.

A spokesperson for Microsoft did not immediately respond for CNBC's request for comment about the report.

Read the full report from Bloomberg here.