In The Future Google Buys Microsoft
I want to take a minute to paint a picture of a future where Google has bought Microsoft's remains, they dismantle Windows, and release the Google OS for the web.
First off, today, Microsoft's market capitalization is around 336 Billion dollars, and Google's is at about 230 Billion. Giving up 100 Billion dollars may seem like too much to overcome, but if Google keeps on their current growth slope, which, being that they haven't even started selling anything but ads yet all indications are that they will, they will pass Microsoft's market capitalization sometime in the next 3 to 5 years.
Basically, the way I see it, Microsoft really won't ever be able to compete with Google on the web. Therefore, Google isn't a real competitor to Microsoft in the traditional sense, which is intentional. I think Eric Schmidt has been stung by Microsoft at Novell, and knows all too well, what happens when you attack Microsoft and you aren't ready to defend yourself properly. By defend yourself properly I mean that you have some sort of foothold on the desktop.
There are any number of ways that Microsoft can make life difficult for Google, by hindering Firefox running on Windows, by making it impossible to use Google gears, etc… in IE. So it is wise of Google to take jabs at them from the outside, while waiting for them to falter. I'm sure Google has some sort of OS kicking around on the Google campus. They have far too many people who are interested in dethroning Microsoft working there to not have an OS. They won't dare release it until Microsoft is weakened to the point where they can't retaliate.
We are seeing the first few chinks in the armor with Vista adoption. Microsoft advocates always point to Windows XP's adoption rate, and how Windows 2000 hung around for quite some time after release, in many cases for four years. I'd argue that Vista is a little different. Most people actually wanted XP, but didn't run it because it had a reputation as being unstable and insecure. The rub is that no one wants Vista because it is slow and too secure. But really they don't want it because it doesn't do anything visibly that XP doesn't.
At any rate, I don't expect for Vista to acheive mainstream success, meaning business adoption, for quite some time, at least another 2 years. By which time Firefox usage should probably be in the upper 60 percent range, while IE is down around 15 percent. Primarily because of the lack of extensibility with plugins.
Google is supporting Open Office and it seems to be getting much better so it will be a real contender by then, with real small business penetration. Microsoft still won't be a viable play on the web, unless they can buy facebook, and even then, they won't be able to heavily damage Google.
If Google can best Amazon with selling books, stereo equipment, etc… directly, they should be able to increase their market capitalization, while Microsoft's market cap decreases. When the time is right, when Microsoft's cap is about half of Google, an offer will come from them. Of course Microsoft will balk initially at this, but then Google will release Google OS, which will immediately be the 3rd most popular OS.
At this time, Microsoft will start making moves to block Google in whatever way possible from Windows, which will just encourage people to switch. At the same time, Google will deepen their application integration with Apple's OS, strengthening Mac OS X to be a viable alternative for business and home.
Microsoft will have lost so much prestige and revenue that its cap will be next to nothing, its stock will be valueless, and Google will pick them up for relatively cheap acquire all of their IP, make native Windows applications run as services over the web on Google OS and migrate the customers to Google OS or Mac OS X. This is how Microsoft will die.
The other parallel future is one in which Google buys Apple, this seems more unlikely now with Eric Schmidt on the board of Apple, they are tight enough, there is no need to combine. Either way Microsoft is toast.
Can Microsoft escape this fate? They can stave off defeat, which I think may be inevitable as long as they cling to the windows platform and fail to embrace Linux, by buying facebook now at whatever the price, and buy Yahoo. They should just stop with Live and their own services, not because they are low quality or poor in any way, it is just because the Microsoft brand isn't associated with the web. It doesn't feel natural.
Microsoft can come out relatively unscathed, if they moved to a platform company like IBM. If they provided a windows compatibility system for Linux, and encouraged developers to build applications on their platform, and if they provided windows business services for Linux as well as SaaS. They just need to get completely away from OS, and business suite sales. These things are becoming a commodity. Ubuntu Linux is stellar, Open Office is superb, Evolution is an incredible PIM solution. The writing is on the wall Microsoft, its over, retire gracefully like IBM and provide solutions to the government and banks.