Microsoft CEO Steve Ballmer was interviewed by USA Today’s David Lieberman at the sixth USA TODAY CEO Forum, in conjunction with the University of Washington Business School. The interview took place in front of an audience.

One question touched on Apple:

Lieberman: People get passionate when Apple comes out with something new — the iPhone; of course, the iPod. Is that something that you’d want them to feel about Microsoft?

Ballmer: It’s sort of a funny question. Would I trade 96% of the market for 4% of the market? (Laughter.) I want to have products that appeal to everybody.

MacDailyNews Take: Like the Zune? Note how Ballmer substitutes Windows vs. Mac market share when asked a question about iPod and the upcoming iPhone. It’s Apple that dominates the music market, not Microsoft. Recognizing that fact, it’s obvious that Ballmer gives “sort of a funny answer,” as he certainly would trade the Zune debacle for Apple’s iPod+iTunes in an instant.

Ballmer: Now we’ll get a chance to go through this again in phones and music players. 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.

In the case of music, Apple got out early. They were the first to really recognize that you couldn’t just think about the device and all the pieces separately. Bravo. Credit that to Steve (Jobs) and Apple. They did a nice job.

But it’s not like we’re at the end of the line of innovation that’s going to come in the way people listen to music, watch videos, etc. I’ll bet our ads will be less edgy. But my 85-year-old uncle probably will never own an iPod, and I hope we’ll get him to own a Zune.

Full article here.

Ballmer plays fast and loose with the truth. He can “prefer” to have his crap software in “60% or 70% or 80%” of so-called “smartphones,” but in reality, he has but 4.6%.

Canalys worldwide total smartphone device market – market share Q4 2006:

Symbian – 72.5%

Linux – 16.9%

PalmSource – 2.0%

Microsoft – 4.6%

RIM – 3.8%

Others – 0.2%

Ballmer’s 85-year-old uncle will probably never own an iPod because he’s related to Steve Ballmer, not because of anything to do with merits of the device. In the relatively small market of 85-year-old uncles, we’d venture to guess that Apple’s iPod dominates that market as thoroughly as it does all other demographic groups.

We have iCal’ed Mr. Ballmer’s statements for future reference.