Surprises for 2006

11. There are three large-scale failures on the lines of Long-Term Capital Management -- two in Asia and one in Europe -- precipitated by an astonishingly large derivative loss that two major U.S. and several overseas money center banks are partially on the hook for.

12. A computer hacker launches a successful attack on a widely used open-source application of the Internet (which extends to closed, proprietary sites) causing chaos and turmoil over a month-long period at Amazon ( AMZN Quote), Google, eBay (EBAY Quote), Yahoo!(YHOO Quote), AOL and many other sites. The Internet HOLDRs Index drops by 20% in two weeks.

13. Google faces numerous legal and competitive challenges in 2006. Its leadership in search is threatened not by Microsoft (MSFT Quote) or Yahoo!, but by a cadre of high-profile engineers within the company itself who embark on their own search mission.

The new competitive player is taken public by Goldman Sachs (GS Quote) and has an instant valuation in excess of $25 billion after its IPO. Google's shares briefly touch $200 a share during the year as competition among the older and the new entities intensifies.

Further hurting Google will be an attempt by the Federal Communications Commission to extend the definition of decency laws to the Internet and a series of adverse court rulings in the Google Book Search case, in a patent issue that is brought up in the courts by content providers and in a major privacy scandal involving the U.S. government.

Most importantly, a suit claims Google has become a Web monopoly and is violating U.S. antitrust law. Microsoft's Vista is more successful than expected, and MSN search experiences a surprising gain of 10 points of search share after hiring two senior Google engineers who introduce massive changes, like eliminating clutter from its homepage.

A high-profile, content-rich media company will make available a free video product, hurting the launch of Google Video. Finally, Google will release far fewer services this year, disappointing investors, as the company realizes it must go through a consolidation phase in which it makes its existing services scale better.