So 17% of the smart phone market which is 14% of the mobile market is around 2-3% of the total market. That's a narrow demographic niche product.
Like I said though, I see the iPhone as a totally different product to the slate being described by most people here. The iPhone certainly has the potential to be main stream given a cheaper price tag.
When Balmer made that comment he wasn't talking about the smartphone market. He was talking about the entire mobile phone market. He even specifically mentions the total mobile sales.
So what he said is (so far) totally true. The iPhone doesn't have any kind of "significant" market share. I quote "significant" because although he was talking about sales numbers one could argue that a share of the profit is more important to a business than a share of the sales.
Of course, I've got no idea what his point was - Balmer on his best day is totally insane. As Carniphage mentioned above Apple are making a massive profit off that small market segment whilst Microsoft is making nothing (I'd suggest Windows Mobile may even be losing money).
So for him to suggest he'd rather have a large market share rather than a small one like Apple, whilst he has virtually none, doesn't make any sense at all.
In any case I still see the iPhone\\iPod market as being different to the slate market. One is main stream (or potentially so) and the other will always have a limited demographic.
It's not like I see that as being a bad thing. Targeting a product to a specific audience means it can be designed to be more ideally suited to their needs. A Ferrari is a narrow demographic niche product.