What Is Microsoft So Afraid Of?

Aug. 1, 2008 — -- It is hardly news when the Redmond software giant behaves a little oddly. But usually that behavior takes the form of bullying competitors or the self-delusion of believing that it is a major technology innovator.

But Microsoft's unusual behavior over the last few weeks has taken a different form: for the first time, perhaps since the Netscape threat arose in the early 1990s, Microsoft is acting scared.

First, of course, there was the still-unsettled attempt at a hostile takeover of Yahoo. Microsoft may still win that one in the end; but in the meantime, despite roaring into the negotiations full of sound and fury, Microsoft ended up being a cat's paw for both the woefully out-of-his-depth Yahoo CEO Jerry Yang and for rogue buyout master Carl Icahn. Then Microsoft, either desperately on the rebound or in a ham-fisted move to make Yahoo jealous, starting making advances at pitiful old AOL instead.

Whatever the strategic advantages of these acquisitions -- and frankly, it's hard to see how bolting one failing search company to another is going to compete any more effectively against a drag racer like Google -- it is hardly the behavior of a company that's sure of its own capabilities and confident in its future.

The old, swaggering Microsoft would have decided that it could win this battle against Google on its own, through a combination of a perpetually upgraded search engine, questionable linkages to existing MS products (such as Vista), raiding talent from Google and Yahoo and strong-arming everyone up and down the distribution and retail chains.

That's how Microsoft used to rule the tech world, and it left both enemies and friends quaking in their boots. It wasn't pretty -- and some of it might not even have been legal -- but that was how MS rolled when it was on top … not groveling to buy some other also-ran.

Ever since the Yahoo debacle, Microsoft has been acting strangely, and one can only conclude that the two events are somehow connected.

Microsoft's suddenly transformed manner first appeared last week after a report, by the systems management appliance company KACE, saying that 60 percent of the administrators it surveyed had no intention of ever implementing Microsoft's year-old flagship operating system Windows Vista -- up 10 percent from last November.

Potentially even more devastating was the fact that more than 40 percent of the respondents said they were actively looking at other platforms, from the Apple Mac OS X to Linux -- while the remainder had either already abandoned Vista or were sticking with Microsoft's older Windows XP.