Ballmer Fears Linux, All Bravado Aside

(MoneyWatch)  Microsoft CEO Steve Ballmer spends a lot of time publicly mocking netbooks and Linux. He did it again last week during his meeting with financial analysts. But netbooks and Linux are the very things that secretly keep Ballmer up at night, because they threaten not just a few points of market share here and there, but the very foundation of Microsoft's business.

Let's look at his public remarks on the subject:

A year ago, the world was still mostly talking about a thing called a MID. Don't know what a MID is, really never knew what a MID was, but we got a real concrete substantiation of a MID during the last 12 months. A MID was a netbook. And when they first shipped, people said, oh, this is this, this is something brand new, this is blah, blah, blah. And they shipped with Linux, and blah, blah, blah, blah. We now know what a MID is. And we now know a MID is a netbook, and what's a netbook? A netbook is a PC. Nobody wanted any netbooks that didn't have Windows on them. So we went from nothing to about 95?€"96 percent attach on netbooks. And I will tell you the other 4 percent probably have Windows on them also.

Ballmer is careful to avoid saying anything of real substance -- it's all in the derisive "nya nya" tone -- so he can't be accused of providing misleading information. But his sarcasm is meant to portray contempt, and his contempt is meant to signal to the market that Microsoft doesn't take any of this seriously. The fact that netbooks are the fastest-growing segment of the PC market; that vendors are lining up to use Windows-rivals Android and Chrome; that more and more computing power is moving to the Web; that consumers and businesses are beginning to accept cloud-based computing as a fait accompli -- all of that is a tale told by an idiot, sound and fury signifying nothing to Microsoft.

But the 10-K filing has no tone, and because Ballmer and CFO Chris Liddell would face jail time for providing inaccurate information in SEC filings, it has to be accurate.

The money line in the "competition" section of Part 1, Item 1 of the 10-K Microsoft just filed with the SEC is this:

competitive pressures lead OEMs to reduce costs and new, lower-price PC form-factors gain adoption. Partners such as Hewlett-Packard and Intel have been actively working with alternative Linux-based operating systems.

And then there's this:

OEMs have been working to make the Google Android mobile operating system more compatible with small form-factor PCs or netbooks.

Todd Bishop at TechFlash writes that this is the first time Microsoft included Canonical and Red Hat as competitors to Windows. "Their inclusion in the filing means Microsoft considers them formidable enough to warrant a mention to investors," Bishop notes.

The one fact Ballmer referenced in speaking about netbooks is the so-called attach rate, and Ballmer will continue crowing about that number for as long as he can. And that will be exactly until the moment Android and Chrome operating systems are shipped to the likes of HP, Toshiba, Acer and Asustek, because that's when Windows will actually have competition. Microsoft loves to talk about competition, but it's been a long time since Microsoft actually had any.

Next time you hear Ballmer speaking, close your eyes and picture him windmilling his arms with his fists clenched, his eyes closed and his head bowed, hoping against hope that he hits something while screaming "I can't hear you!" Because that's exactly what's going on inside.

[Image source: CuteWriting via Picasa]