Microsoft Backs Down

For its part, Google considers Microsoft to be its most formidable rival, Chief Executive Eric Schmidt said during last week's investors meeting. MSN isn't a major contributor to Microsoft's bottom line now, though its importance is expected to grow, says Tony Ursillo, a software analyst with Loomis Sayles, which owns Microsoft shares among its $70 billion in assets under management.

"If you are thinking about Microsoft, five years down the road, you really need MSN to step it up and get some mass," he says.