Microsoft Analyst Day: As The King Was Looking Down, Google Plays Jester

Microsoft Corp’s (Nasdaq: MSFT) Steve Ballmer inks a deal with Yahoo, the software giant’s biggest in years, and all of a sudden he’s invincible.

He sure made it sound that way at the company’s annual meeting with financial analysts this week, calling Apple’s (Nasdaq: AAPL) share gains versus Microsoft a “rounding error.”“Apple’s share globally costs us nothing,” he said, dismissing recent market share gains as a rounding error of market share statistics that he says is likely to oscillate in a meaningless range.

Ballmer has done this sort of thing before. He pooh-poohed Google Inc.’s (Nasdaq: GOOG) Chrome browser-based PC operating system earlier this month. Chrome is slated to ship next year and go into direct competition with Microsoft’s core OS. It takes aim squarely at netbooks, the key growth segment of the PC market.

In launching Chrome, Ballmer made it sound as if Google is making a tactical mistake. He said Google already has its Android handheld operating system, announced earlier this year. What’s the threat posed by yet another?

“I don’t know if they can’t make up their mind or what the problem is over there, but the last time I checked, you don’t need two client operating systems,” Ballmer said in mid-July at Microsoft’s worldwide partner conference.

Of course, Ballmer is the very CEO who also dismissed Apple’s iPhone as a competitive threat last year.

Juvenile barbs from tech executives are commonplace. Ballmer’s would be meaningless, save for the fact that perhaps he should be more humble, especially now. Just last week, Microsoft missed earnings expectations, with every business  unit with the exception of one missing analysts’ revenue expectations.

What’s arguably worse, there was nothing new of substance presented at this year’s analyst meeting. Ballmer spent time explaining all the external factors that are causing the company’s flagship Windows business to lag behind already anemic PC market growth. He gave no indication that the trend would end soon.

Part of the OS market lag, of course, is the sales strength of netbooks — which as a reminder, Google plans to target with a free OS.

Bulls on the Microsoft story can always point back to the company’s fortress-like balance sheet. The company has $31 billion in cash to help it fend off rivals. It’s used its cash hoard to stay on top in the past. And besides, no one company has been able to unseat its market share position in several decades of trying.

So maybe Ballmer has a point about Apple’s gains being a rounding error.

But what about Google?

It’s Microsoft’s partnership with Yahoo that’s merely vying to put a dent Google’s 65 percent ownership of the entire search ad market.

As Google eyes Microsoft’s core OS growth opportunity, Microsoft is playing let’s make a deal to keep from becoming a rounding error in search.

Mike Tarsala.