Microsoft to Google: You Owe Us

ByElizabeth Montalbano

— -- Microsoft's Chief Research and Strategy Officer Craig Mundie said Tuesday that competitor Google owes its business in part to Microsoft, and that his company is not concerned about losing its position as an innovator in the technology market to the search and advertising leader.

"If we didn't succeed at the PC, they wouldn't have a business," Mundie said of Google, in comments made via Webcast at the Goldman Sachs Technology Investment Symposium in Las Vegas on Tuesday.

He said Google was able to grow so quickly because it introduced a new business model for the Web at just the right time. "It wasn't that many years ago that Google didn't exist," Mundie said. But now that the industry and competitors like Microsoft are catching up to Google's online advertising strategy, "I don't think they can do anything we can't do," he said.

In fact, Microsoft's longevity versus its relatively new competitor gives it a substantial advantage long term over Google, Mundie said. "I'd like to think we're strategically open-minded, we've made adjustments [to our business model]," Mundie said. "I'd like to see Google and someone else come up with something that really threatens our business model."

Part of that business model is to combine forces with Yahoo to compete with Google in the advertising market. Microsoft is currently in the middle of what could end up becoming a hostile takeover of Yahoo, after the company rejected the software giant's US$44.6 billion cash and stock offer. Microsoft is now rumored to be mounting a proxy fight for Yahoo.

While Mundie acknowledged that he couldn't discuss much about the ongoing Yahoo proceedings publicly, he did concede that Microsoft is eager to acquire the company and move ahead on the Web. "Right now we'd just like to close the Yahoo deal," he said.

Even if the deal does not go through, however, he said Microsoft is confident its own Web strategy, fueled by a combination of software and services rather than an entirely Web-based portfolio, will eventually help the company catch up to Google -- barring a "major screw-up" on Microsoft's part.

Moreover, Microsoft has a multiyear lead on Google in providing software in mobile phones, another area where the Internet company aims to compete. "They're sort of late to the cell-phone thing," Mundie said, noting Microsoft's success with its Windows Mobile OS, which powers millions of smart phones worldwide.

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