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He described Longhorn as a 'wave' of technologies, rather than a single product, in line with a change in company strategy from 'being completely vision-driven to saying now let's decide what we're going to ship in this date, and then what we'll ship beyond that'.

And so what won't be shipping in the first 2006 release of Longhorn will be the WinFS filesystem, as will perhaps some of the more advanced security features. But other security features will ship ahead of Longhorn: 'We're going to stage some of this stuff out with our Release 2 next year,' he said.

Quite what will be in this Release 2 are unclear. There had been talk of an 'XP Reloaded' release, but exact details never materialised. And while specifics were never mentioned for 'Release 2', it looks to have a security focus.

Ballmer said that the things Microsoft is prioritising on getting out to its customers are ways to protect systems even if they're vulnerable. Part of the problem is that when companies upgrade their software they rarely upgrade all of their software, and so their defence is only as strong as the weakest link, he said.

'I can't say today all vulnerabilities will be eliminated. I think it would be naïve for anybody to say that, partly because the hackers get smarter, too, and the threat models get more sophisticated... You have to plan on an approach that lets people protect imperfect as well as perfect [systems], if such a thing existed, which drives us to this question of resiliency. How do you

Further into the Longhorn wave Ballmer said to expect technologies that place strict policies for vetting systems seeking access to a network that check for security status, AV and up to date and patched software and usage history before deciding whether or not to grant admission.

Ballmer also said he was pleased with Microsoft's efforts to use the legal system and bounties to combat hackers and spammers: 'I think we've done a reasonable job of rustling up some of the people who have caused some of the greatest damage and cost and hardship amongst our customers.

'With that said, the hackers can, in a sense, pop up anywhere at all times, so I don't think we can expect to ever kind of wipe out the phenomenon just from a law-enforcement perspective. I think it's important that it become a lot scarier for people though.'

He also had an interesting tongue in cheek riposte to reports that Linux is fast gaining market share in emerging markets. 'People say China. Our products have higher market share in China than they do in this country, most of it, of course, not paid for. We didn't adopt the conscious pricing strategy in China to match Linux prices; it's just that's what most people happen to pay us.'

But on the question of whether Microsoft should actually drop its prices to make Windows more affordable, he remained unmoved. His position is that those that do buy computers are affluent enough to afford Windows as well, and those that can't afford their own computers are unlikely to pay for Windows either.

He also recognised Linux as competition as on a par with any other rival. 'We certainly compete with Linux and in a sense - you guys had Scott [McNealy, Sun chairman] on stage here, but I think he would say he certainly competes with Linux. We compete with IBM, Sun competes with IBM, but, heck, we compete with Sun.'