I think Ballmer stopped laughing at google sometime between them crawling out of their garage 10 years ago and them approaching MSFTs market cap today.
Until GOOG approaches MSFT's revenues, I don't think Microsoft will worry. If there's a 'war' between those two companies, Microsoft is probably handling it as one of attrition.
Google has one strong source of revenue (search advertising) and has been thrashing about for years in an attempt to build at least a second source without notable success.
Microsoft has many different sources of revenue and continues to build on each. To take out Google, all they have to do is have Bing, Yahoo and the rest patiently chip away at GOOG's search advertising dominance by a few percentage points each year and that revenue will dry up. Then, without that revenue, all of Google's vanity projects will collapse in a heap.
You can make anything fly if you have a strong enough engine shoving it and Google's engine is its search advertising revenue. Once that revenue decreases enough, their lawnmower will fall to earth, and Microsoft is surely happy to see them tack on new expensive doodads like YouTube and Chrome O/S to hurry that day forward.
Somehow the anecdotes of Ballmer throwing chairs and threatening to "fucking kill" Google run counter to your speculation. Either Microsoft is getting worked up over a non-threat or Google is more dangerous than you think.
Google has one strong source of revenue (search advertising) and has been thrashing about for years in an attempt to build at least a second source without notable success.
Microsoft has many different sources of revenue and continues to build on each. To take out Google, all they have to do is have Bing, Yahoo and the rest patiently chip away at GOOG's search advertising dominance by a few percentage points each year and that revenue will dry up. Then, without that revenue, all of Google's vanity projects will collapse in a heap.
Google's many projects remind me of the Flying Lawnmower: http://www.youtube.com/watch?v=kNWfqVWC2KI
You can make anything fly if you have a strong enough engine shoving it and Google's engine is its search advertising revenue. Once that revenue decreases enough, their lawnmower will fall to earth, and Microsoft is surely happy to see them tack on new expensive doodads like YouTube and Chrome O/S to hurry that day forward.