Sun Microsystems Inc. chief Scott McNealy recently raised eyebrows – and a few hackles – with his proclamation during a keynote interview that “software is a feature” and not a product separate from hardware.

Gartner Group Inc. analysts during the ITxpo conference final keynote interview in Lake Buena Vista, Fla. with Microsoft Corp.’s president and CEO Steve Ballmer asked for his view of that opinion.

Leaning far forward on his chair, Ballmer shouted, “That, my friends, is why you ought to steer clear of Sun. That’s the most patently absurd thing I’ve ever heard!” The audience cheered and applauded.

“Software is the future of this industry,” Ballmer said, detailing all of the things that software allows users to do, including Web-based applications, electronic commerce and work productivity tools. Ballmer did allow that some critics contend that software also causes problems – but it solves them, too, he said.

The future of technology rests on applications and “not some big honking expensive box from Sun,” Ballmer said. McNealy spent a lot of time in his keynote interview touting his company’s hardware, including servers and something he repeatedly referred to as “BFWTS – big freaking Web tone switch.”

“Sun just doesn’t get it,” Ballmer said. “I’m not saying there’s no value in hardware, but it’s such a patently crazy thing to say (that software is a feature).” That view denies the importance of end users and developers, Ballmer said.

He ended the discussion regarding McNealy’s comment by saying, “Yeah, I’m a little passionate on this topic,” adding that he was having fun with the subject.

Whatever his views of McNealy’s assertion regarding software, Sun remains a top Microsoft competitor, Ballmer said when asked to tick off the list of main competing companies the Redmond, Wash.-based company faces in the next five years.

“Even though Scott makes crazy assertions, he’s not going to drive his company out of business in five years,” Ballmer said.

Oracle Corp. is another main competitor. So is IBM Corp., though increasingly IBM and Microsoft will be partners, Ballmer said, even as they continue to be rivals.

America Online Inc. should be included in any top list of Microsoft competitors because AOL, like Microsoft, focuses on the way people use their computers, Ballmer said.

Fifth on his list is Linux, which he referred to as a “company.” Asked about that mistaken reference to the open-source operating system, Ballmer amended his comment and said, “fifth phenomenon.” Though it presents Microsoft’s Windows operating system with competition, Ballmer earlier in his keynote chat said that Microsoft isn’t going to rush into offering applications on Linux, though its recent investment in Corel Corp. could well lead to that. But right now, the Linux movement is too “messy” and so Microsoft is going to sit back and see what happens in that area before making much movement into it, he said.

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