Microsoft CEO Steve Ballmer just can't resist taking shots at the iPhone. Who can blame him, the iPhone has the potential to redefine the entire handset business -- as well as position OS X as a competitor in the mobile OS market.

In an inteview transcript published in today's USA Today, Ballmer takes another swipe at the iPhone:

There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.

Ballmer re-iterates Microsoft mission of capturing the mobile OS market. While Windows Mobile has traction in the U.S. IT enterprise sector, Windows faces stiff competition from RIM's BlackBerry platform domestically and trails Symbian in the global smartphone market.

Ballmer denies rumors that Microsoft is working on an iPhone competitor, dubbed the Zune Phone, "It's not a concept you'll ever get from us. We're in the Windows Mobile business. We wouldn't define our phone experience just by music."

And of course, Ballmer takes a shot at Google Apps:

They've come out with what I might call -- what's the politically correct way of saying it? -- they've come out with some of the lowest functionality, lowest capability applications of all time. (Laughter.)

If you want to sit and write a paper for school, you're not going to use Google Docs. You can't even put a footnote in. Now, last time I checked, that's still kind of important to give attribution. (Laughter.) There are some basic, basic things that you just don't find.

In the short run, we don't have a lot of competition; in the long run, sure. We always have some competition. We have competition from OpenOffice. We have competition from StarOffice. We're going to have competition from Google. We have competition from IBM. And competition is a very good thing for Google to give us, and for us to give Google.

Oddly enough, Ballmer seems low on vitriol when it comes to Google's pending merger with DoubleClick and the online ad market:

It doesn't mean we always do everything right. Really understanding the power of advertising as an Internet business model we came to later than I wish we had. That's the No. 1 thing I regret. We underinvested in some opportunities for a while.

So, it doesn't mean we get a perfect outcome at all times, but we certainly have a lot of formal checks and balances in our system that push us along.

Does this mean that Microsoft is scared that the Google can now kill MSN? What do you think? Is Microsoft scared of Google? Are Ballmer's criticisms of the iPhone and Google Apps without merit? Or is Ballmer up to his old tricks by trying to trash these products before they have a chance to take off?