Microsoft never has lost its hardball edge. In a discussion with Gartner analysts at Gartner's annual Symposium ITxpo, Microsoft CEO Steve Ballmer called his competitors "pretenders."

Ballmer said Microsoft realizes computing is in the midst of a shift from desktop-centric to a more balanced world that interweaves the best of the Web, the PC, enterprise functionality like manageability, and the explosion of different devices, but that companies looking to develop platforms on a larger scale have far to go.

"I think when it comes time to really building platforms; we have a lot of experience," he said. "It's taken us 17 years but people think we finally get it a little bit in the enterprise. Some of the pretenders have no enterprise expertise."

A lot of expertise, he said, comes down to the actual feature set and functionality competitive applications have, especially on the Web. "At the end of the day, the actual functionality in the application still matters," he said. "People don't want to go backward when it comes to presentation or word processing capabilities." Later, he specifically called out Google. "What we've seen out of the other guys is maybe not even as good as 'me, too,' so I feel very well differentiated versus Google on the productivity, business infrastructure space."

Some of the other interesting exchanges and points:

• Ballmer admitted Microsoft's a long way from taking over the top spot or any other in search and advertising. "We've got a lot of work to do to differentiate ourselves in search and advertising," he said. "We're number three, working to be number two, and working to be number one." Within the last few weeks, the company began rolling out some significant to its search products to try to catch up.

  Actually, Microsoft is only number three if he's not including China. A global study released this week by comScore placed Microsoft fourth behind Google, Yahoo and Chinese Web portal Baidu in search. Still, Ballmer hinted there might be something more significant up Microsoft's sleeve. "We're going to try to re-write the rules on how [the search and advertising] game works, and when we have something to say there, you'll see it," he said.

• There may be a few new billion dollar businesses on the horizon for Microsoft, other than advertising. Ballmer said that SharePoint is "closing in on a billion" and that systems management products in the form of System Center are not far behind. He also said he thinks Office Communications Server, the unified communications server being released next week, can become a billion dollar business.

• Gartner analyst Yvonne Genovese stuck it to Ballmer about her problems with Windows Vista. She was an early adopter, buying and installing Vista after her daughter gave it two thumbs up. "I like your daughter already," Ballmer said. "You're not going to like her mom in about two minutes," Genovese snapped back. She re-installed Windows XP after only two days on Vista. Ballmer kept up. "Your daughter saw a lot of value," he responded. "She's 13," Genovese quipped. "She's a user, and you're going to hire her in about nine years," Ballmer said with the last word.

  That's not to say Ballmer didn't admit there were some problems with the Vista roll-out. "When we initially shipped, fewer device drivers were ready for Vista than I would have liked," Ballmer said. "Same thing on applications, because of the changes we made in security, there were some things applications needed to do. Taking care of some of the issues is important. We've got SP1 out in beta; it addresses a lot of the customer feedback.

• Microsoft got customers annoyed after continually delaying Vista and Longhorn Server, now Windows Server 2008, and Ballmer said the company might be getting a little tighter with release dates as a result. Following Apple's lead, Ballmer said Microsoft might not say much at all about consumer products until they're released from now on. "Just the way the consumer market works, the element of surprise is actually of some value in the marketplace," he said.

• Ballmer predicted many Microsoft products will never become entirely browser-based. "The truth of the matter is you will never be able to do as good a job on Microsoft Office if you're just browser-based as you can if you're rich client based," he said. "But we need to simplify deployment. That is the bigger issue. Software should be able to self-manage, desktops should be able to self-update."

So there's a balance to be struck between the benefits of online delivery that limit the amount of stuff users need to install and the benefits of the desktop like rich, interactive applications that aren't constrained by the browser's rules.

"We've already moved in the direction where more operating system capabilities flow down to you with things like Windows Update," Ballmer said. "We're moving in this direction initially with things like Windows Live, it's a layer that can kind of come down onto a Windows PC. So, you'll see the operating system have more of what I would call real-time extensibility via the cloud and you'll start to see the cloud pieces do richer things on rich clients.