Microsoft has dominated the personal computer but can it launch a counter offensive against its new competitors.

"Google threatens Microsoft's position on the Internet, and could potentially lock Microsoft out of its existing distribution channels and reduce the value of Windows." -- 2005 memo written by several Microsoft executives

Microsoft has dominated the personal computer through its all powerful Windows operating system and office applications but as Windows became bigger and more complicated, getting updated versions out of the door became harder. In addition, the development teams have significant and well publicised security problems to solve within the existing code base.

In a previous generation, both Microsoft and Apple put pressure on IBM, the incumbent giant. Now it is the new competitors who are testing Microsoft's ability to react and perhaps launch a counter offensive. Google has been recruiting hard, drawing some of the best talent around to its expanding range of internet based projects.

Microsoft must successfully launch Vista, its next generation operating system but there is no guarantee on the numbers of users who will choose to upgrade and it is sure to provide another opportunity within the corporate market for Linux to establish a larger market share as company's ponder upgrade costs.

The role of the MSN portal and Microsoft's new search technologies is still unclear. The company itself it still undergoing essential corporate restructuring and there is continued speculation about Microsoft's relationship with other internet companies and the possibilities of acquisitions and mergers.

There are many jokes within the tech community that everything Microsoft touches turns to stone. But no one should under estimate the power and resources of the company. There are huge strategic dilemmas for the company and it now has powerful competitors but it could still find the focus and creativity to provide the next generation of technical innovation.