Microsoft in 2005

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When Microsoft hired computer scientist and speech recognition expert, Kai-Fu Lee away from hardware maker Silicon Graphics in 1998, the move underscored how thoroughly the software giant dominated the computer industry. Not only did Microsoft monopolize PC operating systems and hold an edge in Web browsers, but it also attracted the world's brightest technologists. In July 2005, when Lee left Microsoft to join Google, it seemed to signal the reversal of Microsoft's fortunes. In a completely defensive move, Microsoft sued to stop Lee from working for the upstart, citing a noncompete agreement in Lee's employment contract...

For most of its three decades, Microsoft had faced intense criticism from the outside world. Rivals and competitors complained about the company's heavy-handed tactics. Microsoft had been dismissive of these remarks. But now much of the sharpest criticism came from within. Dozens of current and former employees were criticizing the way the company operated internally...

Contrary to widely held perceptions, Microsoft's top management believed the company had not lost its ability to innovate. Senior managers pointed out that there were several areas where exciting work was going on.

One was MSN, the Internet operation, where the search group was the underdog competing against Google.

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