Ballmer is pretty tricky with words. You have to read them carefully and know the situation to see the lies. For example, take this paragraph:
"We do not anticipate offering software on Linux. Nobody pays for software on Linux. Even StarOffice, sold by Sun, was originally a free product. And IBM, arguably the No. 1 player in the Linux market, promotes Linux to big users, but does not actually sell Linux"
Notice he starts by talking about selling software on Linux, but the points he makes about IBM are about Linux itself, not selling software on Linux. In fact, every counterexample he used is actually an instance of people selling software on Linux. However, in the Ballmer reality distortion field, this somehow proves his point. It is true, IBM does not sell Linux. The do sell MANY APPLICATION that run on Linux, which was what the paragraph was presumably about. As is usual, Microsoft is trying to scare people out of providing applications on Linux.
The problem with anything that Microsoft says is that much of it is either deception or outright lies. For example, they point out Linux's system requirements as too large for embedded work here http://www.microsoft.com/windows/Embedded/xp/evaluation/compare/notlinux.asp yet their own product requires an even larger footprint.
Anyway, it's true Microsoft needs to come up with a new way of providing value, because the programming community at large has largely obsoleted most of their technology. Open-source isn't about taking on Microsoft or anything like that - it's about professionals working together to further their profession. When the entire worldwide professional computer community works together, there's nothing that other companies can really do to stand in their way - they either need to join or become obsolete.
On my Linux box, I play games, create 3D animations, write music, develop applications, manage my personal finances, write email, create presentations and so on. Why would I (or anyone else) need Microsoft's help for $700 per computer (OS + Office)?
While more and more people start realizing that the software industry at large has been massively overcharging them, the market will flood toward companies who a) are part of the global development community, and b) leverage their knowledge from the community to provide products that provide much more value than they cost. That is the open-source way.