Ballmer acknowledged that the company, long the dominant force in consumer and business software, is getting "competition from a lot of different places." Among operating systems, he mentioned Linux , Apple, Android and Google's Chrome OS, although he noted that he doesn't know "what Chrome OS is yet."

Windows 7 Is 'Job One'

Even as he admitted competition from other operating systems, Ballmer expressed confidence in the upcoming Windows 7 release, adding that it is "absolutely job one" at Microsoft. He did not make specific projections, however.

Speaking to a meeting of financial analysts in the company's headquarters and noting a number of Macs among them, Ballmer said Apple gained some market share at the beginning of the company's fiscal year and Windows regained some by year's end. But he dismissed the amount of business that Apple has taken away from Microsoft as being the equivalent of "a rounding error."

He also defended this week's 10-year deal with Yahoo where Microsoft's Bing search engine and its adCenter platform will be used for Yahoo's search-based advertising business. As part of the deal, Yahoo's sales force will handle higher-level customers for both companies. A Senate committee has announced plans to investigate the deal.

In addition to Windows 7 and search, Microsoft is heading in new directions this year. It is opening new retail stores in California and Arizona, pushing deeper into cloud computing, and launching updates of its Windows Server and Office products, among other things.

Ballmer noted that one area -- mobile -- had "a tough year," and added that the problems were "mostly our own issues, frankly." Entertainment and Devices President Robbie Bach acknowledged that the company's market share for its Windows Mobile OS dropped in the last year.

'Kindler, Gentler Steve Ballmer'

This is a "kinder, gentler Steve Ballmer," said Laura DiDio, an analyst with industry research firm Information Technology Intelligence Corp.

She said he has "grown up a lot by necessity since the days when he would describe Linux as 'a cancer.'" He hasn't really changed his tune, DiDio said, but has "toned down the rhetoric."

With this approach, she said, he and other Microsoft executives are showing they are "confident but not cocky," that they're acknowledging when they've made mistakes, and that "they're listening."

She added that, following the recent disappointing financial reports, this approach can help them address the challenges Microsoft is facing, such as the competition from Google and the need to make sure that Windows 7 succeeds where Vista has not.