Clash of the Titans

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

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