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Google ( GOOG) has performed a number of unprecedented feats. For example, in its brief life, it has become the 20th largest market capitalized of any company in the U.S. Equally astonishing is that its cash flow in the latest quarter exceeded $4 million per employee.

From my perch, however, this prosperity will not last.

No doubt, Google will have another monster quarter -- perhaps two or three -- but the troops forming phalanxes in Redmond, Wash., aka Microsoft ( MSFT), will provide the first real challenge to Google.

In October 2006, Microsoft will release Vista (formerly Longhorn). Similar to the recent Xbox 360 release, the release will occur at the front edge of the 2006 Christmas season. This long-awaited operating system will be included in the millions of new (and ever cheaper) computers sold during the holidays. Vista will integrate the new Microsoft search, which includes a desktop search incorporated directly into the system. This is critical: It's similar to how Microsoft integrated the MS Explorer Web browser directly into the Windows operating system as a hyperaggressive competitive move against Netscape in the previous decade.

Critics have historically derided Bill Gates and company for not being innovators. "They stole the Mac operating system and have been stealing ever since" is the claim always made. This is true enough, but misses the point badly: Being the second mover has indeed been advantageous to Microsoft. As they say, the "pioneer always gets arrows in the back."

The check-raise can be a powerful strategy for the poker player with a strong hand who is competing against an aggressive player. Microsoft has been observing, waiting and copying an emerging technology, and this can be a powerful competitive strategy.

This is especially true when you have deep pockets and a diversified revenue base (unlike Google, which is vulnerable because it reaps the vast majority of its revenue from one source). Microsoft also has deep-rooted expertise in fighting a war of attrition.

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