Microsoft, Google gear for titanic clash

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Microsoft and Google are girding for battle for supremacy over the information technology sector, a duel watched closely by others in the sector.


The spectacular rise of Google in the past few years has raised questions about whether the Internet search titan is on track to dethrone Microsoft and Bill Gates as the undisputed high-tech superpower.

To meet the challenge, Microsoft is pouring billions of dollars into its most significant wave of product launches in years, including the new version of the Windows operating system called Vista, and new version of the Office suite of business software.



Microsoft is also moving into growing businesses such as Internet search and online advertising, where it is trailing Google and other competitors. It is also investing on a dozen other fronts, including making the most of the early start Xbox 360 holds over Sony in the lucrative video-game market.

"Today, we believe we face the largest array of opportunities for growth and innovation the company has ever seen," Microsoft chief financial officer Chris Liddell said recently.

But concerns about Microsoft's dominance were underscored by the most recent quarterly results of the two firms.

Google reported a 60 percent gain in profits (to 592 million dollars), while Microsoft's 16.4 percent gain (to 2.98 billion dollars) disappointed financial markets.

Amid fears that it is being overtaken, Microsoft has been seeking new alliances. According to the Financial Times, Yahoo chairman and CEO Terry Semel said at a Syracuse University question-and-answer session that the company turned down an offer from Microsoft Corp. to buy a stake.

He said the groups discussed "Microsoft co-owning some of our search," but added, "I will not sell a piece of search -- it is like selling your right arm while keeping your left. It does not make any sense."

Joe Wilcox, analyst at Jupiter Research, said Microsoft is late in realizing the formula of online advertising linked to search that has been so lucrative for Google. Microsoft last week launched its MSN adCenter that seeks to mimic the Google scheme.

(Ads by Google)"Competition between Google and Microsoft isn't new, just the increasing number of news stories, particularly following last week's official launch of MSN adCenter," Wilcox said.

He said that "Google is to Microsoft what Microsoft was to IBM in the early 1980s," with Google more attuned to the future, moving to capture the consumer shift to more functions online.

"Google doesn't make an Office suite, nor an operating system. Google doesn't compete in any of Microsoft's core desktop markets," Wilcox said.

"Yet Google is at the cusp -- perhaps is the leading company -- of another computing shift. The World Wide Web is the tidal force of that change, which in the late 1990s Microsoft valiantly pushed back by integrating Internet Explorer into Windows."

Carmi Levy, analyst at Info-tech Research said that based on stock market prices, "the market is showing that it isn't convinced that Microsoft will ultimately win this fight."

Levy said Microsoft's traditional model "has been to sell CDs of software," but that "the model that allowed Microsoft to become the dominant software vendor of the past generation is being threatened."

Still, Levy said Microsoft cannot be counted out because of its massive size and ability to adapt.

"Microsoft has traditionally been a come-from-behind company," the analyst said. "It came from behind to dominate the desktop application space with Microsoft Office, the server space with Windows NT and later Server 2003, and the browser market with Internet Explorer. In each case, Microsoft knocked off the incumbent, dominant players: WordPerfect, Novell and Netscape, respectively."

Google CEO Eric Schmidt told shareholders recently the battle is not a zero-sum game.

"If you see the story in terms of will there be a winner and a loser, you miss the point," he said.

"There's room for more than one winner. Google will be one of the winners. We have two talented competitors, Yahoo and Microsoft."

© 2006 AFP