Google's Desktop Foray Is Smart, but Risky

"I think the strategy on Google's part is really rooted in the precedents of the past," said Tony Ursillo, an analyst at Loomis, Sayles & Co., who suggested more investor awareness of competition from Microsoft will hurt Google's valuation.

"You need to almost get into Microsoft's head and figure out where they're going as it affects your business and evolve your business there, or try to hit back at [Microsoft] where they're vulnerable," Ursillo added. (His firm holds Microsoft shares.)

With its foray into desktop search, Google is doing both -- anticipating Microsoft's next moves and hitting the company where it's vulnerable.

Desktop search is "something guys like us have been beating [Microsoft] up on for 15 years," said Tim Bajarin, president of Creative Solutions, a Silicon Valley-based market research and consulting firm.

"From Google's standpoint, that search engine they have is so powerful that to apply it only to the Web is a little shortsighted," he added. "They're solving a problem that has been a frustration for users all along, which is being able to search local content."

Bajarin speculated that Google may offer a PC search tool free to individual users, but charge companies an annual fee for a more elaborate search tool capable of sifting through corporate databases and servers. "I think there's a good business opportunity," he said.

But the window of opportunity before Microsoft jumps in may eventually close on Google, Kleynhans said. Microsoft is typically good at laying out its vision -- it initially disappoints but then eventually gets things right, he noted.

"I think Google is well-positioned to leverage its brand between now and when Microsoft is able to deliver something," Kleynhans said. "That doesn't mean they can hold onto it in the long run. Realistically, the search battle is going to go on for the remainder of this decade."

So, anyone searching for a quick resolution to the battle between the year's most-heralded IPO and the Redmond giant is likely to be disappointed.