Technology's big hitters battle it out

The war between Google, Apple and Microsoft is hotting up thanks to new search engines, unexpected alliances and accusations of Soviet-style tactics

The global triumvirate of Microsoft, Google and Apple, each masters of a particular technological craft, could be looking toward an unexpected realignment. It does not yet register as a revolution but in the three months since the launch of Microsoft's well-received search engine Bing, the much-maligned software giant has started to make inroads on market behemoth Google and is now looking to make gains on Apple – which has been making bizarre missteps of its own and has tarnished its closely-managed reputation for hipster cool – in the area of high-end PCs and laptops.

After years of near-misses and lacklustre products, Microsoft is winning critical plaudits – for a new generation of the Windows operating system, Windows 7, for Bing, for its Zune music player and new Xbox software, for Office 2010 and several new editions of software aimed at the profitable corporate market.

"There's a lot positive things happening at the end of this year and the beginning of next that a lot of pundits don't properly appreciate," says Robert Helm, managing vice president of research at Directions on Microsoft, an independent firm of analysts. "Microsoft has a wave of strong new products and with recent developments like the Yahoo deal its definitely positioned for a resurgence when the economy turns."

Perhaps most surprising for everyone accustomed to Microsoft's second-tier reputation, was the launch in June of its Google-competing search engine. While the industry awaits the arrival of the potentially game-changing Facebook Search, Bing has won uncommon praise.

Despite its strange name, Bing is much like Google (there's a website to compare the two, bing-vs-google.com). The search box and options – web, images, videos, news, shopping and maps – are much the same. Yet the typically-unimpressed technology critics have come out for the newcomer.

"Here's the shocker," wrote the New York Times David Pogue. "In many ways, Bing is better." Bing's superiority over Google in, say, offering previews of videos or in travel reservations, has yet to be matched in news search or maps. But the Microsoft product's strong innovation, where a pop-up balloon showing you the first few paragraphs of a search result without having to open the page itself, is proving popular.

Says web consultant Craig Stoltz: "In some ways, the search experience with Bing is better than Google. It seems like Bing returns shorter, more valuable results. Google returns millions of results but a lot of them are pretty useless."

The company's 10-year pact with Yahoo gives Microsoft control of Yahoo's search business. Instead of forking over $47bn for Yahoo – the price at which negotiations floundered last year – Microsoft CEO Steve Ballmer struck the deal for virtually no money down – and that despite Yahoo's boast that an agreement could only be made for "buckets of cash". Now Ballmer says Microsoft can "swing for the fences" against the mighty Google.

Bing's 10 per cent share of the search market compared to Google's 67 per cent hardly makes Microsoft a direct threat. But, says Helm, with Yahoo's share of the market added, Bing is now impossible for advertisers to ignore.

"The most important thing about the Yahoo-Microsoft deal is that it means Microsoft can still give Google competition and at least nibble at its lunch. The really critical thing about Bing is in preventing Google from hurting Microsoft in other areas."

Is it too soon to call Microsoft cool? Probably. But Keith Richman of Break.com says: "Suddenly you don't feel like a moron for saying you use a Microsoft product." Still, Microsoft's plans to launch company-branded stores of its own has been met with derision. Analyst Charles Wolf recently tore into Microsoft, saying the company's claim to innovation was false: "The company's true genius has stemmed from its ability to copy the ideas of others."

Certainly, the computer industry needs a hit from Microsoft. From chip-makers to manufacturers, the software giant hasn't given consumers, coprorate or personal, reason to spend. Mostly its been the opposite: consumers rushed to uninstall Vista and replace it with the older, more reliable XP.

If Windows 7 is as good as critics say and with personal computing rapidly moving toward inexpensive netbooks – essentially smaller, lighter, minimalist laptops – Microsoft may suddenly find itself on the right side of the play, while Apple could find it increasingly hard to justify the steep price differential in its products.

Despite Apple's massively successful iPhone, the company still needs a new product to drive sales of its laptops and computers. The iPod is now an old product, and the anticipated Apple tablet-style reader is yet to emerge. In all probability says Helm, the netbook computer is no benefit to either Microsoft or Apple. "They'd like the category to go away altogether. The low price of netbooks doesn't benefit either company – they'd prefer to sell more expensive laptops with more expensive software editions." Nonetheless, Helm adds, the laptop and PC business is critical to Microsoft, especially since Apple has taken a strong lead in handheld computing.

"Apple continues to make progress with premium PCs and laptops and Microsoft would like some of that money back," he says. "The Apple iPhone continues to make huge strides in the mobile realm – an area where Microsoft was always a strong contender but where it now seems to be relegated to back of the pack. Compared to that, any PR gains Microsoft has made are pretty minor."

Still, Apple's own flaws may end up benefiting Microsoft. The dark side of Apple, that of a secretive, fiercely-disciplined and highly authoritarian firm – a virtual cult of personality under Steve Jobs – is becoming more evident. Apple-watching has always been akin to looking for clues to Soviet leadership in the May Red Square parades. In the past, the company's credo of secrecy served no greater purpose than a kind of tech-showbusiness, but it has now drawn Apple into a nightmare of regulatory and PR problems.

The US Securities and Exchange Commission is currently investigating whether the company misled investors and breached rules for publicly- traded firms when, in January, it announced that its CEO Steve Jobs was taking leave for a "nutritional imbalance". In June, it came to light that Jobs had, in fact, had received an emergency liver transplant.

In the past, Apple has successfully shut down websites releasing news of new products. Now that the company is doing business with thousands of independent developers of iPhone applications, more stories of Apple's tough business practices – the darker side of the company – are leaking out.

The Times's Pogue, usually a fan of the company, writes that the company's mask "is starting to slip" and he accused the Cupertino, California firm of "heavy-handed, Soviet information-control". At issue are applications – apps – that Apple wishes to exclude from the iPhone, including Google Voice, a potentially revolutionary long-distance texting and voice-mail management system.

The move prompted the resignation of Google CEO Eric Schmidt from Apple's board of directors. One of Jobs' top lieutenants, Phil Schiller, was dispatched to counter fierce criticism among Apple fans that the company was acting for AT&T, the US cellphone carrier. Still, Apple, which has sold more than a billion apps since the online store was launched a year ago, has not only angered critics and customers, it has laid down a challenge to programmers to go round or "jailbreak" the block.

Ironic, perhaps, that similar charges that were once levelled at Microsoft are now aimed at Apple. Microsoft is now viewed as a bumbling giant, not the evil monopolist of the browser war era. Even the image of the hopeless Microsoft, carefully and expensively promoted by Apple, is beginning to look dated.

Of course part of Bing's appeal is that it's not Google, which has become predictable in its terms of reference. If Microsoft can position its products as efficient and dependable (which for most people is all that a computer and the internet needs to be) then at least Bill Gates will be less vexed by Apple's relentless appeal to cool. Most critics says Microsoft will never be able to win the battle for customers seeking to enhance their identity with technology.

It may still be too early to call a Microsoft revival but Apple's credo "Think Different" is tarnished and the search business has a new player.

"Microsoft has the most diverse and biggest business and can take the most damage," says Helm. "It's still the hardest to hurt and not dying – or at least being the last one standing – is the most important characteristic of a technology company."