Google has made no secret of the fact that they designed Android as a hedge against MS control of the mobile landscape. It wasn't until Apple came out of nowher

Google has made no secret of the fact that they designed Android as a hedge against MS control of the mobile landscape. It wasn't until Apple came out of nowhere with the iPhone that they had to set their sights on both targets. Ballmer should be very concerned about Android. Microsoft is a software company. They make money selling software licenses. Google is an advertising company. Therefore, Google can give operating system software away for free all day, without hurting their own core business (in fact, the goal is obviously a net benefit). This has MS backed into a corner. If they compete on price, Android devices will be cheaper. If they go high-end, they bump into the maw of Apple with excellent design and tight hardware/software integration. The mobile versions of Windows need to be so compelling that consumers are willing to pony up the extra cash, but not so expensive as to draw comparisons to Apple. Talk about threading the needle. The main play MS has is tight enterprise integration (sharepoint, Exchange, Office, etc...). There is probably a way for them to make a case to IT managers about the benefits of the total MS stack. But it's still not clear how big an impact the enterprise is going to have on the mobile space, which seems to be driven largely by the consumer sector. Interestingly, Apple is is using this same jujitsu on Google. Apple is a hardware company. They make money selling shiny, physical stuff. They are trying to hit Google where it hurts by offering advertising revenue to developers (and taking a comparatively small piece for themselves). If they want, they can ratchet up the payout to developers all day without impacting their core business. Google can't do that.