• MS revenues stable in the short-term, as installed Windows base still high
• Google is continuing a broad strategic shift, from being the providers of an excellent, innovative search product to being providers of a platform who actually don’t innovate as much as they like to think
• The ‘providers of a platform who actually don’t innovate as much as they like to think’ business is/was MS’s home territory. As such, Google’s entry represents a significant threat
• However, MS has more to offer as a firm that provides ‘excellent products’ - Exchange/Office and Xbox being the two best examples
• Although it will be painful, MS should be prepared for the inevitable loss of platform dominance and concentrate entirely on backing great products in its core area(s) of expertise: business productivity and communication (note that Android phone and iPhones have adopted Exchange, and that Google now licences ActiveSync) and home entertainment (Windows Media Centre beats Apple TV hands down, and I can’t see Google Launching a G-Box)

Long term, I think MS needs to start behaving like a more standard, mature company. That means better dividends, surrendering of legacy markets and ruthless focus. This may eventually mean a split between the business apps firm and the home media entertainment firm.