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Friday, July 31, 2009, 06:45 am PT (09:45 am ET)

Steve Ballmer calls Apple's Mac growth a "rounding error"

Speaking to a group of market analysts this week, Microsoft Chief Executive Steve Ballmer repeatedly mentioned Apple, including a suggestion that a growing rate of Mac adoption is statistically insignificant.

"Share versus Apple, you know, we think we may have ticked up a little tick," Ballmer said at the 2009 Financial Analyst Meeting, "but when you get right down to it, it's a rounding error. Apple's share change, plus or minus from ours, they took a little share a couple quarters, we took share back a couple quarters."

The Microsoft executive said he expects Windows to continue to trade market share with Mac OS X back and forth, though he added he feels taking customers from Apple is a limited resource.

"Apple's share globally cost us nothing," he said. "Now, hopefully, we will take share back from Apple, but you know, Apple still only sells about 10 million PCs, so it is a limited opportunity."

The 40-minute speech covered a variety of Apple-related topics, including product pricing, advertising, and the number of Macs in the audience. Ballmer noted the large number of Apple machines in the crowd as he spoke, saying the Windows maker has a "low share" in the investor audience.

"I can see the Apple logos versus the PC logos," Ballmer told the crowd. "So we have more work to do, more work to do. Our share is lower in this audience than the average audience. But don't hide it. I've already counted them. I have been doing that since we started talking."

The CEO also, in a roundabout way, acknowledged that Apple is known for making higher-quality hardware than Microsoft's PC partners. But Ballmer said he expects consumers to be surprised at some of the new offerings available this fall alongside the debut of its new operating system, Windows 7.

"At least when Apple attacks us, the primary attack that comes from Apple is, 'Hey, at the end of the day, we have the coolest hardware,'" he said. "When you see the hardware, the PC designs that will come out this Christmas with Windows 7, I think that conventional wisdom can begin to really change. There is some really amazing, amazing work. So it is possible to get great hardware innovation, even when hardware and software comes from separate companies."

Microsoft's top official said Windows falls in between OS X and Linux into the market sweet spot — not too expensive, not too cheap. Just weeks ago, Ballmer laughed off the threat of Google's open source Chrome OS. This week he said Microsoft's goal is to dominate the market, rather than carve out a niche.

"We do not, say, like Apple, believe in low volume, very high prices, very — Apple is a great company, does a fine job. But their model says high margin, high quality, high price," he said. "That's kind of how they come to market. We say we want big market share. But with big market share, you take a lower price."

Recently Microsoft changed one of its advertisements attacking the high cost of Apple products after legal threats. The Microsoft executive spoke about those commercials, but did not talk about the recent controversy. Instead, he said the "Laptop Hunters" ads have changed some public perception about the Microsoft brand as it relates to Apple.

"And are the ads working?" he asked rhetorically. "In an independent survey, we asked 18- to 24-year-olds—or they were asked, "Who offers the best value, Apple or Microsoft?" You can kind of see Apple was comfortably ahead despite the fact they — well, despite whatever the facts are. Our ads started in April of '09. You can see kind of what the perception changes have been so far."