Jobs’ relationship with Bill Gates goes back the furthest and is the most complicated. But the two pioneers of the PC era met one last time near the end of Jobs’ life and talked for several hours. Gates told Jobs that he proved his model—of controlling computer products from end to end—works. And Jobs said that Microsoft’s model of licensing out the OS to other manufacturers worked as well.
Only later did Gates relate to Isaacson: “What I didn’t tell Steve is that it only works when you have a Steve Jobs.” When Isaacson asked Jobs if he really thought the Microsoft model works, Jobs replied: “Yeah, it works, but only if you don’t mind making crappy products.”
Why is licensing crappy? Simple. You can fire employees who screw up. Much harder to fire a partner, let alone a hardware partner who doesn't understand software but will basically add bugs the second they touch anything.
In 2003, when I was with the Windows Mobile team, this the primary reason why the product sucked so badly. But that's also why we could never make the iPhone.