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The San Diego Union-Tribune

Microsoft faces no shortage of well-financed challengers


January 3, 2006

Windows is still the brains of nearly every PC, and Microsoft remains one of the most profitable, powerful and storied companies ever created. But its financial growth is slowing as a handful of Internet companies such as Yahoo, eBay and most particularly Google have matured into well-financed rivals challenging Microsoft in several areas.

Web-Based Software and Services

Companies such as, and others are offering Internet-based programs to rival Microsoft software programs that are resident on the personal computer. Web-based software and services often are supported through advertising revenue, rather than by charging for the software, the model that made Microsoft a colossus.

Open-source Software

The Internet lets developers share code and collaborate on building software at low cost, and open-source alternatives to Microsoft systems are gaining popularity. Some governments are seeking uniform standards for software purchases that would prevent getting locked into proprietary systems like those offered by Microsoft. In addition, some open-source systems have large corporate backers to help them compete with Microsoft, such as International Business Machines and Google.

Antitrust Enforcers

Microsoft settled most of its antitrust cases in the United States but suffered serious setbacks in the European Union and South Korea over similar issues. It is under orders to "unbundle" certain programs, such as its media player in Europe and instant messaging system in Korea, from its Windows operating system.

Search Engines

If there has been a killer application on the Web over the past few years, it has been search, and Microsoft significantly trails Google and Yahoo. Microsoft hoped to catch up by forging a deal with America Online to replace Google as AOL's search partner, but Google outmaneuvered and outbid Microsoft to maintain its foothold with AOL's large audience.


Microsoft made a big bet on Internet gaming with Xbox 360, which has been met with generally positive reviews but is expensive and dogged by lack of availability during the holiday buying season. Here again, Microsoft faces established rivals, most particularly Sony. Meanwhile, Apple Computer set the standard for buying music online with iTunes, and Microsoft has now all but ceded this territory.

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