“Prior to joining Google, I set up a meeting on or about November 11, 2004 with Microsoft’s CEO Steve Ballmer to discuss my planned departure….At some point in the conversation Mr. Ballmer said: ‘Just tell me it’s not Google.’ I told him it was Google. At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office.”

- Former Microsoft Distinguished Engineer Mark Lucovsky

“I’ve never thrown a chair in my life….By and large I made a commitment nine years ago that I was not going to curse. I know I’ve had one or two transgressions in nine years, but I made that commitment to myself. Is that one of them? I don’t recall.”
– Microsoft CEO Steve Ballmer

The rumors are true. Mark Lucovsky, the engineer whose departure from Microsoft (MSFT) allegedly sent CEO Steve Ballmer into a paroxysm of profanity and chair-tossing, has left Google (GOOG) for a new position at VMware (VMW), the company has confirmed.

Lucovsky, once a Microsoft Distinguished Engineer and a key architect of Windows and the company’s ill-starred Dot-Net strategy, was hired away by Google in 2004. Now, five years later, he has unceremoniously left the search sovereign for a senior engineer position at VMware. There, he’ll be reunited with Paul Maritz, president and CEO of VMware, who once served as Vice President of the Platform Strategy and Developer Group at Microsoft.

“Prior to joining Google, I set up a meeting on or about November 11, 2004 with Microsoft’s CEO Steve Ballmer to discuss my planned departure….At some point in the conversation Mr. Ballmer said: ‘Just tell me it’s not Google.’ I told him it was Google. At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office.”

- Former Microsoft Distinguished Engineer Mark Lucovsky

“I’ve never thrown a chair in my life….By and large I made a commitment nine years ago that I was not going to curse. I know I’ve had one or two transgressions in nine years, but I made that commitment to myself. Is that one of them? I don’t recall.”
– Microsoft CEO Steve Ballmer

The rumors are true. Mark Lucovsky, the engineer whose departure from Microsoft (MSFT) allegedly sent CEO Steve Ballmer into a paroxysm of profanity and chair-tossing, has left Google (GOOG) for a new position at VMware (VMW), the company has confirmed.

Lucovsky, once a Microsoft Distinguished Engineer and a key architect of Windows and the company’s ill-starred Dot-Net strategy, was hired away by Google in 2004. Now, five years later, he has unceremoniously left the search sovereign for a senior engineer position at VMware. There, he’ll be reunited with Paul Maritz, president and CEO of VMware, who once served as Vice President of the Platform Strategy and Developer Group at Microsoft.

While a lot of analysts and pundits have suggested that Microsoft would or should surely jump into the fray–now that AOL and Yahoo are talking merger more seriously, and especially since Yahoo’s stock has dropped in the $14 range–don’t count on it.

In fact, in what has to be the most Zen-like approach it has ever had, sources close to Microsoft’s thinking actually hope that the talks to combine the Time Warner (TWX) unit and Yahoo (YHOO) will work out.

Why? Because, although some think such a merger would leave Microsoft’s digital aspirations out in the cold–since both AOL and Yahoo are now allied with its archrival Google–the software giant sees the pair coming together as yet another chance to get what it really has wanted all along from Yahoo.

That would be Yahoo’s declining but still significant search business and another shot at AOL’s.

Let’s be clear–Microsoft (MSFT) wants nothing else from Yahoo anymore, according to numerous sources, even though it made a noisy and ultimately failed attempt to buy the Internet giant.

It will not be making another bid, sources said, echoing Microsoft CEO Steve Ballmer’s public and internal pronouncements on not revisiting another Yahoo takeover bid.

But Microsoft is hoping that if Yahoo and AOL merge, the new company will see that its fate lies more in its advertising, content and communications businesses, and not in search.

Microsoft is also figuring that regulators will not allow AOL to continue its search ad partnership with Google, a deal that the software giant lost out on. As part of that deal, Google (GOOG) got a five percent stake in the AOL unit.

But, once AOL is combined with Yahoo, execs at Microsoft hope it will give them the in they have been looking for to reignite failed talks with Yahoo over a search deal that Google also won.

That Yahoo-Google deal to outsource some of its search ads is now being studied by the Justice Department, which is seriously considering blocking it. Microsoft hopes it will founder, which it is more likely to do if Yahoo combines with AOL.

Thus, Microsoft just waits.

It will be interesting to see if this snake-in-the-grass strategy will work for Microsoft, which has yet to come up with an effective online strategy in the consumer space and must still find a digital head.

Ballmer continues to want to nab an outside superstar exec for the daunting job–the names of some former Microsoft execs like Brad Silverberg and Paul Maritz have even been raised internally–much to the chagrin of the leading internal candidate, Brian McAndrews.

Now that appointment is starting to feel like a really complex two-step.

Until it all sorts itself out, what a good opportunity to post this most popular of all online videos–101 million plays!–on YouTube, “The Evolution of the Dance”:

The company, which went public August 13, 2007 at $29 a share, immediately went soaring higher, trading as high as $125.25 on an intra-day basis last Halloween. At the time, the perception was that the company had essentially no competition in the burgeoning market for server virtualization software; Microsoft (MSFT) has since made an aggressive move into the market, as did Citrix Systems (CTXS).

Several analysts this morning actually asserted that replacing Greene with former Microsoft exec Paul Maritz should be considered a positive development for the company. “It was not a completely unexpected move,” writes Citigroup’s Brent Thill.

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“As one of the founders and the leader of VMware, Diane guided the creation and development of a company that is changing the way that people think about computing,” Joe Tucci, Chairman of VMware’s board, said in a statement. “The board thanks her for her considerable contributions to VMware and wishes her every success in the future.”

VMware offered no reason for Greene’s departure, though presumably it has something to do with the company’s lowered guidance. The company’s stock tanked on the news, falling more than 30 percent to $36.97, taking billions of dollars of shareholder wealth with it. Truly an ugly decline for a company that launched the biggest technology IPO since Google went public in 2004. Since hitting a 52-week high of $125.25 last October, shares VMware have shed nearly 70 percent of their value.