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Microsoft Gives Up the Grail

When Ballmer talked about Vista sales forecasts, he was ignoring that one-time bump in revenue.

But it's not clear that the analyst forecasts that he believed were overly optimistic were also factoring out his blue bell. When Merrill Lynch analyst Kash Rangan confronted him with that possibility, Ballmer's tone grew uncertain, stuttering, as if he realized he may have blundered big time.

Here is part of the exchange that follows, according to the transcript on Microsoft's investor relations site:

Steve Ballmer: What I basically tried to say in the very highest level was that you shouldn't think of a huge surge in fiscal year '08 versus fiscal year '07, huge relative -- I mean, in some senses whatever you think the growth is of PCs in developed markets, in developed markets -- because I talked about emerging markets -- we should do somewhat better than that. We shouldn't do that much better, we should do that much better, whatever it means. This is before the accounting one-time blah, blah, blah.

Rangan: That was very good.

Very good, indeed. You can almost hear the analysts thumbing in messages to favored clients on their BlackBerrys.

I found Ballmer's diffident tone more discouraging than any single comment of his. Gone is the Ballmer who skipped mightily across the stage, who pumped his fists and shouted "Come on!" ... who exhorted the crowd to "Give it up for me!" Instead, he starts off the analyst briefing with jokes about infected feet, infected stocks and profuse sweating.

The rhetoric of global domination that Microsoft relied on for decades is vanished without a trace. Now the tone is more hat-in-hand solicitation, with talk of being in third place but trying harder.

Ballmer did promise great things a few years down the road, such as an ambitious initiative involving health care and subscription-based revenue from companies using customer relationship management and other business services.

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