Clash of the Titans

The battle lines between Microsoft and Google run through Seattle.

By Stuart Glascock | February 2010 | FROM THE PRINT EDITION

Credit: Illustration by Tom Cocotos

Schmidt vs Ballmer Seattle's Fremont neighborhood,
with its 18-foot-high bridge troll and seven-ton sculpture of Lenin, has billed
itself as the Center of the Known Universe. Yet this funky nexus of vegetarian
restaurants and yoga studios has emerged as a focal point in a fierce battle
for dominance of a broad range of critical technologies.

Google, the Master of the
Internet, has a block-long, three-story building here, just a Frisbee toss from
the blue and orange Fremont Bridge. Mountain View, Calif.-based Google Inc.
also has facilities in Kirkland and downtown Seattle, where thousands of
Googlers develop and promote a wide range of products, many of them aimed at
the heart of Microsoft's most profitable franchises such as Windows, Office,
Windows Mobile and Exchange.

It's a raging struggle for
global technology superiority with billions of dollars at stake. The battle,
whose intensity has been heightened by the personal animosity Google CEO Eric
Schmidt feels toward Microsoft, has generated a lot of heat, including rival efforts
to acquire strategic targets such as Yahoo, legal jockeying and more than a
little sniping. This conflict may also be the source of accelerated investments
that have resulted in significant innovation benefiting consumers across the
planet.

The battle escalated
dramatically last summer when Google announced it was developing the Chrome
operating system, a potential competitor to Microsoft Windows. Microsoft
punched back quickly, saying that its next version of Office (Office 10) would
include free, online versions-a direct shot at Google's web-based office suite,
Google Docs. Then, Microsoft unveiled its new search engine-Bing-and secured a
partnership deal with Yahoo. This arrangement could double Microsoft's market
share by putting the Bing search engine on Yahoo's popular sites.

The clash has been classically
described as one between the cool, edgy Google that wants everything open and
free (like Fremont) and the old, established monopolist. But the contest is
more complex. Google is now an 800-pound gorilla in its own right, viewed
skeptically by many consumers as well as government regulators.

Google is Microsoft 20 years
ago, says Rob Helm, analyst at Kirkland-based Directions on Microsoft.

"Google is riding a wave of new
technology that threatens Microsoft's core business, the same way that
Microsoft rode a new technology-the PC-over the top of IBM," he explains.

Microsoft is no sleeping giant.
It is moving aggressively to defend its turf. Microsoft's only way out, says
Helm, is to outperform, outsmart
and "out-Google Google."

That's a tall order. And Wall
Street, for one, is putting its money on Google. While Microsoft is worth about
$270 billion and its after-tax profits in the year