Microsoft's chief executive officer, Steve Ballmer, has defended the company's relationship with Telstra, dismissing reports the two companies were approaching a split.

Ballmer mentioned the "speculation about what kind of relationship [Microsoft] and Telstra have" at a joint Microsoft/Telstra launch of the "xda", a combined mobile and PDA device that uses Microsoft Pocket PC software. Ballmer described Telstra as a "lead launch partner" and said the two companies would be working closely together to promote the device to the enterprise market.

The xda has been optimised for use on the Telstra network, to the extent that the Telstra settings for WAP and other protocols are "burnt" into the ROM of the device. Microsoft also has a range of developer programs to encourage local application creators to make software that will operate well over the Telstra network.

Ted Pretty, group managing director of Telstra Retail, also talked up the relationship. "Telstra was the first Microsoft enterprise customer globally, so we go back a long, long way," he said. In commenting on future collaboration between the two companies, Pretty said: "The way this market has restructured over the years the reality will be the stronger players in the marketplace...will be the ones that need to join together to take advantage of that opportunity. And that's us, and we will continue to do that."

The industry has been awash with rumours that Telstra is considering dumping its Windows platform and switching to an open-source alternative. When Ballmer was asked whether Microsoft would offer a discount to Telstra to encourage it to continue to use Windows, he said it would not, before launching an attack on open-source software Lindows and Star Office.

" I'd start with the fundamental value we offer, which I think is pretty good," said Ballmer. "I'd start with the value of the offer...Star Office runs on Linux, and Linux is very, very, very expensive for customers to take care of."

"The additional cost of installing, managing, taking care of Linux on the desktop, is hundreds of dollars per year," said Ballmer. "If you take a look at the functionality of Star Office compared to Microsoft Office, it's quite a bit weaker." Ballmer said that Microsoft studies showed most business users used 80 percent of the functions in Windows, even if it was just viewing a spreadsheet or Power Point presentation created by someone else.

Ballmer also cited lack of interoperability with Microsoft products as a reason to avoid Star Office, before having a dig at the system as a whole.

"There's no innovation going on in the desktop environment, either in Linux or Star Office," said Ballmer. "Linux is a cloning operating system, it cloned Unix now it's trying to clone windows, but some people might think it would be nice to get some new innovation."

This follows an open letter to Ballmer from Michael Robertson, spokesperson for Lindows, in which he quotes prices from Walmart to show a Lindows powered computer that retails for US$427.28 would cost US$1,067.10 if it had a similar setup on Windows XP.

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