Google takes aim at Microsoft's core
Posted
Jul 08 2009, 05:11 PM
by
James Dlugosch
Rating:
So I visited www.bing.com searching the words, “operating system”. At the top of the results page I find a story on Google’s plan to launch its own operating system in direct competition with Bing owner Microsoft's most critical product.
Now that is good humor. I suppose if I went to www.google.com and typed in the word, “search”, I would get a story on Microsoft’s Bing. (Editor's note: Microsoft publishes MSN Money.)
Watching this latest competition between Microsoft (MSFT) and Google (GOOG) (Read "Will Google's Chrome Chip Away at Microsoft"s Veneer?" for my take on the details) will provide amusing story lines for years to come. Most interesting is that the stakes here are so huge.
Microsoft’s death grip on operating systems has been in place since the birth of the personal computer. Google, the upstart, dominates the search category has helped redefine Internet use and advertising.
As is typical of Microsoft, it has been incredibly envious of Google’s effort and success. Millions of dollars have been spent in efforts to better compete in search, including a failed attempt to purchase Yahoo (YHOO).
At the same time, Google and its open system environment made clear its intentions to be more than just search. While being subtle about strategy, there was no doubt that the upstart planned to compete directly with Microsoft on its home turf.
Now we learn just how real those plans are. In a blog announcement last night, Google stated that it would launch an operating system in the near future. Targeting low priced notebook computers, the company said it would make the software available to customers in the second half of 2010.
Look past the sensational headline and I see desperation here. This Hail Mary move is directly correlated to the surprising success Microsoft is having with the launch of its search engine, Bing.
While it is a big deal that Google will compete head to head with Microsoft's OS, the launch of the product is still a year away or more. In technology terms, that is a lifetime. Anything can happen between now and then.
The reason for the release now is that Google is rightly petrified that Bing is making some serious inroads. I suspect there is plenty of inside information to suggest that Bing is doing better than anyone could have ever guessed.
Any sane person would recognize the vulnerability of Google. With very few barriers to entry, competition could be expected. Where Google excelled was with branding and simplicity.
The customer is used to using Google and not likely to change. Or so we thought. Perhaps a change to Bing is easier than expected.
What investors in Google counted on was the ineptitude of Microsoft, but that ineptitude looks to be replaced by fortitude and persistence. Bing is a nice product, and I would be worried if I were Google.
As for operating systems, we have seen this game before. Microsoft has destroyed others that have encroached on its space. It is easier for me to see success competing in search than it is competing in operating systems.
Since Bing was launched, shares of Google have dropped hard. They saw a very small bump on the news of the operating system. Microsoft shares, on the other hand, have been appreciating nicely.
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Going forward, I expect that trend to continue. This is setting up to be a great pair trade: Go long Microsoft and short Google. This Google announcement smells like panic to me. At a minimum, it should raise your eyebrows too.
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Editors Note: Microsoft publishes MSN Money.
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