For the last two decades, Microsoft has mightily overpowered the Mac operating system and others, and has maintained a dominating lead in the sale of operating systems for personal computers. However, Apple, for its part, has been equally dominant (if not more so) in the sale of personal music players, since introducing its phenomenally popular iPod nearly six years ago.

With Apple's new iPhone slated for release this summer, it will be interesting to see whether Apple, the king of personal media players, can grab a significant share of the smartphone market. Ballmer might say no... but Apple begs to differ.

Apple has repeatedly said that it plans to sell 10 million iPhones, which run an optimized version of the Mac OS X operating system, before the end of 2008. As various analysts have pointed out though, Apple may have a hard time hitting its target because of its decision to work with just one carrier (Cingular/AT&T) and because of the unit's projected cost: $499 for a 4GB model and $599 for 8GB.

Sounds Like Fightin' Words

During an interview last week with USA Today's David Lieberman, Ballmer acknowledged Apple's success with the iPod, but dismissed the iPhone as irrelevant. Irrelevant? Yes, indeed... irrelevant.

"There's no chance that the iPhone is going to get any significant market share," Ballmer said. "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 [Windows Mobile] software in 60 percent or 70 percent or 80 percent of them, than I would to have 2 percent or 3 percent, which is what Apple might get."

An estimated 5 million handsets are already powered by earlier versions of Microsoft's Windows Mobile and Windows CE. And, in February, Microsoft announced the release of Windows Mobile 6 (WM6), the latest version of its mobile operating system. Over the coming months, a variety of phones powered by WM6 will be released, including handsets from the Orange network in Europe, Softbank Mobile Corp. in Japan, and T-Mobile in the United States.

A Tipping Point

At their Mobile and Embedded DevCon in Las Vegas this week, Microsoft Entertainment and Devices Division President Robbie Bach said that Microsoft's mobile business has reached a tipping point. He told reporters that, given the momentum behind WM6, he expects Windows Mobile handset sales to total between 10 and 11 million in 2007, and twice that in 2008.

"Today, there's almost 150 devices that run Windows Mobile for mobile phones, it's offered by 125 operators, and also 50 handset manufacturers," Bach told the audience of developers. "This is a rich, vibrant ecosystem. And it doesn't matter whether you want a keypad , whether you want a touchpad, whether you want a slider phone, you want a candy bar, you want a flip phone, we have, on the Windows Mobile platform, whatever phone you want."

Will Ballmer's dismissal of the iPhone as a high-tech irrelevance be correct? Or will Apple's uncanny ability to transform form and function into "cool" bring us iCalls, iBusy, and iHang Up? One thing's for sure: It's going to be an interesting year in the phone biz, as the battle of the operating systems rages on.