Microsoft CEO Steve Ballmer and Chief Software Architect Ray Ozzie put on a poor performance when quizzed by Walt Mossberg at the All Things Digital conference, judging by Ina Fried’s live blog.

What was wrong with it? They allowed the conversation to be focused mainly on competing products: Apple iPad, Google Android, Google Apps, Google search. Since these products have exposed weaknesses in Microsoft’s own offerings, it was unlikely to work out well.

Mossberg asks about the transition to the cloud. “You guys are putting, for instance, a version of Office in the cloud.”

That was a gift. You would expect the two men to enthuse about how Microsoft’s dominance with desktop Office was now including the cloud as well, how the Office Web Apps enable new opportunities for collaboration, how Microsoft’s investment in XML for Office was now enabling the same document to live both on the desktop and in the cloud.

Nope. Ozzie waffles about people being more connected. Ballmer “disputes the notion that everything is moving to the cloud”.

So what about Steve Jobs prediction, of a transition from PCs to tablets and mobile devices? Ballmer says “not everyone can afford five devices,” lending support to the notion that Windows is for those who cannot afford something better.

Mossberg asks about tablets. Although Mossberg did not say so explicitly, tablets have been a tragi-comedy at Microsoft. Bill Gates evangelised the tablet concept years ago, pre-echoing Jobs’ claim that they would largely replace laptops. Microsoft tried again and again, with XP Tablet Edition, Vista on tablets, then “Origami”, or Ultra-mobile PC. Going back even further there were was the stylus-driven Palm-size PC (I have one in the loft). Tablet PC was not a complete failure, but remained an expensive niche. Origami sank without trace.

Ballmer replied that the “race is on”. Meaning? I guess, now that Apple has demonstrated how to make a successful Tablet, Microsoft will copy it? Or what?

I am not sure how you defend such a poor track record; but the starting point would be to explain that Microsoft has learned from past mistakes. In some ways it has; Windows 7 learns from mistakes in Vista, and Windows Phone 7 learns from mistakes in Windows Mobile.

None of that from Ballmer, who says vaguely that he expects Windows to run on a variety of devices. He makes matters worse later, by defending the stylus. “A lot of people are going to want a stylus,” he says. Some do, perhaps, but Apple has pretty much proved that most people prefer not to have one. I’d like to see effort go into designing away the need for a stylus, rather than implying that Microsoft is just going to repeat its part mistakes.

Someone in the audience asks, “Will we see Silverlight on Android or iPhone?” “My guess is  if it did, it would be blocked”, says Ballmer, ignoring the Android part of the question.

He’s ignoring the force of the question. Why bother developing for Silverlight, if it is locked into a Microsoft-only future, especially considering the company’s poor position in mobile currently? Ballmer could have mentioned the Nokia Symbian port. He could have said how Microsoft would get it on iPhone just as soon as Apple would allow it. He could have said that Microsoft is working with Google on an Android port – I don’t know if it is, but certainly it should be. He could have said that Silverlight plus Visual Studio plus Microsoft’s server applications is a great platform that extends beyond Windows-only clients.

Microsoft does have problems; but it also has strong assets. However it is doing an exceptionally poor job of communicating its strengths.

Update: There is a fuller transcript at Engadget, in which Ballmer and Ozzie come over better, though they still fail to impress. On mobile though, I like this comment:

We have new talent, we had to do some cleanup, we did it for Windows, and we’re doing it for mobile. And excellence in execution is also part of the equation.

I’d be interested in hearing from anyone present at the event.