It's not another bubble, but wild times are back in the technology industry. A massive shift has begun, and it's centered on Microsoft...

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It’s not another bubble, but wild times are back in the technology industry.

A massive shift has begun, and it’s centered on Microsoft, as the company and its competitors reposition themselves — in some cases as partners — for the future.

That’s created a wave of tech news this week that feels like the boom of 1999 viewed through a funhouse mirror: Apple rolls out video players, Google bids on America Online, Microsoft makes nice with RealNetworks and does deals with Yahoo!

Industry watchers say it’s only the beginning. They expect the pace to continue through the fall as companies jockey for new positions. Microsoft is trying to be more like faster-moving Internet companies, and Internet companies are trying to be more like Microsoft — turning their Web sites into places where people spend the day working and playing, instead of a few minutes visiting.

“I would call it a flood of activity,” said Friday Harbor technology commentator Mark Anderson. “That’s what’s so strange about it — there was nothing doing a month ago, and suddenly we’re in full flood here.”

Anderson said the driving force is high-speed Internet access. With fast connections finally becoming widespread, software, computers, advertising and entertainment are changing fast. That’s creating new business opportunities — Google’s recent litany of new initiatives is the best example — and forcing Microsoft to reach out to former rivals like Yahoo!, which already has a strong position in this connected world.

“There is a big change in the competitive landscape,” said David Smith, an analyst with the Gartner technology research company. “It’s all being driven by what I would call the emergence of the Internet platform.”

This shift helps explain why Microsoft reorganized its business last month, Smith said. The company merged its MSN Web business with Windows and put a bigger emphasis on delivering services over the Internet, positioning the company to better compete with Google.

“What’s at stake ultimately is their strong position in the industry,” Smith said. “The world is changing, and they need to change with it or be left behind.”

How it will shake out is anybody’s guess. The rumor and speculation mill fired up in mid-September when word leaked that Microsoft was trying to link MSN with its nemesis, AOL, then it kicked into overdrive when Silicon Valley stalwart Sun Microsystems said it was working on technologies with Google.

It has made for good headlines, but it hasn’t played well on Wall Street. Microsoft stock is down $2 over the past month, and tech stocks in general were down yesterday after concerns were raised about Intel and Apple sales.

“I think the partnerships are heading in the right direction. It just might take some time to see the tangible results for Microsoft,” said Standard & Poor’s analyst Jonathan Rudy.

Goldman Sachs analyst Rick Sherlund said Microsoft stock in particular may not be reflecting the action that’s under way. Investors may be concerned about competition from Google, or that Microsoft won’t catch this next wave.

“I do think that a lot of the roads do point back to Google here,” Sherlund said. “Yahoo!, as well as Google, could be in a position to host some competing software as they already are beginning to do with e-mail, and calendaring and contacts are likely closely following.”

As for all the rumors about AOL, Sun, Google and others, Rudy said, “it’s getting to the point where it’s a little ridiculous until something is announced.”

“With so many different, disparate rumors going on,” he said, “I don’t know if anybody has a handle on what’s going on.”

In the meantime, here’s a cheat sheet to help keep track of it all.

Apple and video

Apple’s new video iPod was unveiled yesterday, but the $299-$399 device is just part of the story. Apple’s trying to extend its leadership role in digital music into video on several fronts. The company upgraded its iTunes service to sell video content for $1.99 apiece. Disney’s ABC is providing television shows, including the popular “Desperate Housewives.” Lost in the hubbub was news that its iMac desktop computer is morphing into a home-entertainment center to play videos, and now comes with a TV-like remote control.

The Microsoft angle: Video is one place Apple is playing catch-up to Microsoft. Microsoft introduced a portable video player in 2003 and made a content deal with TiVo last January, but its device never caught on like the iPod. On the desktop front, Microsoft has a wide lead with its Media Center PC product, introduced in 2002. Microsoft is expected to announce an updated version and report better-than-expected sales tomorrow.

Yahoo! and MSN Messenger

Microsoft and Yahoo! announced yesterday that their instant-messaging services will now work together. They’ve been working toward “interoperability” for years, but competition from Google’s new communication services apparently sped up the alliance.

The Microsoft angle: Microsoft wants its messaging platform to be used as widely as possible. It’s part of a bigger effort to become a major player in communication as consumers and office workers increasingly use a blend of voice, e-mail and instant-messaging services to stay in touch. The Microsoft-Yahoo! alliance also places competitive pressure on market leader AOL.


The Wall Street Journal yesterday reported that Google and Comcast have teamed up to make a “serious” bid for a stake in Time Warner’s AOL service to align themselves with its Internet presence. Last month, the New York Post reported that Microsoft was negotiating to buy a stake in AOL.

The Microsoft angle: Although they used to compete fiercely, Microsoft and AOL have had a partnership since they reached a settlement in 2003 of a Time Warner antitrust suit against Microsoft. Microsoft would like AOL to use its new MSN Search technology instead of the Google system AOL now has. That could boost MSN Search and slow Google, which gets 12 percent of its sales from AOL. Cards on the table may include the MSN Internet-access business that Microsoft has tapered back and Microsoft software that Time Warner may be interested in, such as its television platform and copy-protection technology.


To settle an antitrust lawsuit brought by RealNetworks, Microsoft agreed this week to pay its longtime competitor $761 million, make Windows a better platform for Real’s products and promote Real’s Rhapsody music service on MSN.

The Microsoft angle: The deal largely ends Microsoft’s antitrust problems in the U.S., and the partnership will help both companies compete with Apple. By adding Real’s music catalog to its search service, Microsoft also gains against Google and Yahoo! search operations.

Google-Sun Microsystems

Speculation ran rampant when the two Silicon Valley companies scheduled a news conference last week to announce a new alliance, but the industry shrugged at the actual news: largely that the two will work together on future products. Google, whose chief executive used to work at Sun, will also buy more Sun servers.

The Microsoft angle: A sigh of relief in Redmond? Pundits expected that Sun and Google would work together to deliver word-processing and other productivity software online, taking a bite out of Microsoft’s Office franchise, but it hasn’t come to pass yet. The news conference did raise questions about the Sun-Microsoft alliance that was formed in 2004 when the two companies settled Sun’s antitrust suit against Microsoft.

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