"Phones: We've gone from very small to very small but it's been a heck of a year," Ballmer said. "You're going to see a lot of progress in that market."

With Nokia betting the farm on , and more than 20,000 built for the platform in the last eight months, Ballmer pointed to analyst predictions that Windows Phone 7 will eventually outsell the and trail only .

"Gartner and IDC both did predictions this year, saying Windows Phone would be the No. 2 phone in the market by 2015," he said.

Ballmer didn't detail numbers for , which lags cloud rivals such as Amazon EC2.

But he expressed excitement about Bing, Microsoft's answer to Google's search engine. The Bing site itself grew U.S. market share by three points, moving up to 14.1% this year, he said. Adding in Yahoo, which now powers its search results with Bing, Microsoft is "collectively serving 30% of the search needs of users here in the U.S.," he said.