Google's Desktop Foray Is Smart, but Risky

Already the most popular search engine on the Web and most-hyped initial public offering of the new millennium, Google is now setting its sights on the desktop -- the domain of behemoth Microsoft(MSFT Quote).

Google soon plans to introduce a file and text search tool to help users locate information on their personal computers, The New York Times reported Wednesday. The Google software will primarily compete against Microsoft's own woefully deficient search function, which Bill Gates' company plans to improve with a new version of its operating system due out in 2006.

But analysts say the move by Google is unlikely to pose a serious threat to the world's largest software maker -- and may instead highlight the competitive challenges confronting Google.

"Is it a real threat? No, but it would be a bump in the road that Microsoft wouldn't necessarily want to deal with," Meta Group Vice President Steve Kleynhans said of Google's expected entry into the desktop search field.

Microsoft's new operating system, code-named Longhorn, is slated to include a new file system called WinFS that organizes data to enable faster searches on a PC. But if Google beats Microsoft to the punch, that could hamper other Microsoft longer-term strategies for Windows, Office and collaboration products, said Kleynhans, who covers end-user platforms for Meta.

Still, he and other analysts pointed out that PC search is just one component of Longhorn, which also will offer better graphics and better data-sharing across multiple applications. Probably more important to Google, however, is the potential inclusion of a Web search engine in the next version of Microsoft's operating system, which currently boasts more than 90% market share.

To appreciate the danger of such bundling, investors need only recall Netscape's demise after Microsoft bundled its rival browser, Internet Explorer, with its Windows OS.