Are Microsoft and Google Faking it?

When you look at all the products that Microsoft (MSFT) and Google (GOOG) have built to eat into one another's business (Google Apps vs. Microsoft Office, Chrome vs. Internet Explorer, the list goes on), you might be forgiven for thinking that the two giants are waging a titanic struggle for unquestioned dominance of the tech world. But according to Holman Jenkins Jr., who has just written a fascinating piece for the Wall Street Journal, you'd be dead wrong. Google and Microsoft aren't bent on one another's destruction, he writes; they're bent on surviving, and the only way they can is to build a massive arsenal of potentially rival products, ready to be unleashed but really designed to lie inert and threatening.

Think of the two companies, Jenkins writes, as two vast superpowers engaged in a long Cold War, assembling an array of nuclear weapons while secretly hoping they never have to use them. The rival tools they have built to challenge one another's core businesses are really just deterrences, weapons that could be lethal if either side really wanted to commit to pushing them on the market but which nibble around the edges instead. It's a vast game of mutually assured destruction, he concludes, a strange dance in which each company warily eyes the other, ready to go to war but hoping the other side won't push them to the brink.

"Their little secret is that neither Google nor Microsoft really have an interest in challenging each other's core franchises if it means risk to their own," Jenkins writes.

Their posturing is primarily defensive—fear of loss is greater than hope of gain. ... That doesn't mean their skirmishes aren't meant to draw blood, which is what makes them credible. Their threats and gestures probably do take a modest toll on each other's profits. Google undoubtedly is more susceptible to pushback from advertisers who can say, semi-believably, that they might shift some of their business to Bing. Microsoft might bend a little more for corporate clients on the price of Windows or Office if a customer can point to, say, a Google alternative he might patronize.

Naturally, the fondest wish of both companies' shareholders is that they find a cheaper way to deter each other, or better yet strike a cease-fire. In short, they wish Google and Microsoft would reach the kind of condominium that Google and Apple have reached.

Ever wonder why Google CEO Eric Schmidt sits on Apple's (AAPL) board, incurring the wrath of antitrust Justice Department lawyers? Suppressing competition, Jenkins writes, is entirely the point of his Apple board seat. Google and Apple long ago reached an accord to avoid directly competing with one another as much as possible. But Google and Microsoft can't quite bring themselves to trust one another, and so they have to assemble rival products and be ready to go to the mattresses at a moment's notice. It's a fascinating take, although it sounds like a bit of a stretch; there's a lot of money to be made building the Chrome operating system for cheap netbooks, for example, and that tends to be a pretty powerful incentive. But as the kids say, we recommend you read the whole thing.