What's more, as a recently revealed e-mail thread pertaining to Microsoft's Windows Vista Capable debacle indicates, Intel wields significant clout with its partners. According to the e-mail thread, Microsoft adjusted its Vista labeling requirements to allow systems based on Intel's 915 chip set to be labeled as capable of running Vista, even though these systems cannot handle Vista's hardware-accelerated interface.
Intel's most formidable direct rival is Advanced Micro Devices. AMD made a successful play at expanding its market reach beyond enthusiast processors by outmaneuvering Intel with a 64-bit chip strategy based on extending the x86 instruction set, rather than by creating a wholly new 64-bit architecture, as Intel did with its poorly received Itanium processor.
In a reversal of the two companies' typical leader-follower roles-and a demonstration of its strength-Intel quickly rebounded by releasing its own implementation of AMD's 64-bit x86 extensions in the form of the Intel EM64T (Extended Memory 64 Technology) architecture. AMD may not be large enough to topple Intel's x86 dominance, but the existence of a solid competitor to Intel has helped spur innovations such as hardware-assisted virtualization extensions and multicore processor advances, while keeping Intel honest with its pricing.
Moving forward, Intel's most challenging competition may come from the world of mobile computing, where smart phones and so-called mobile Internet devices, such as Apple's iPhone and Nokia's N800 Internet Tablet, have matured enough to begin vying with traditional "fat" notebook PCs.
In the mobile realm, processors based on ARM's Advanced RISC Machine architecture currently rule the landscape. In 2006, Intel divested itself of its own ARM-based product line, and Intel recently announced a new line of x86-compatible chips for mobile devices to be marketed under the brand name Atom.
Intel is betting that x86 compatibility will prove as valuable in the mobile device space as it has in the 64-bit processor market. And, if the chip giant turns out to have wagered poorly, it has demonstrated it has the heft to change course once again.
As of January, the Windows operating system had 91 percent of market share, according to the Net Applications Web site. Meanwhile, Microsoft's dominance in the office productivity sector is estimated at 90 percent. In other words, Microsoft owns the desktop.
The company's formula for success is equal parts brilliant business strategy and ruthless strong-arming.
Microsoft makes the platform on which desktop applications are run, giving Windows apps an architectural advantage over other desktop software. In addition, the company offers the tools with which many Windows applications are developed, asserting influence from the ground up.
Case in point: Microsoft sparred with Sun Microsystems in the '90s over Microsoft's implementation of the Java programming language. Through its development tools, Microsoft made it easy and attractive to develop Java applications that relied on Windows-specific components. The strategy effectively short-circuited Sun's Write Once, Run Anywhere promises for Java with Windows-only applications.
Microsoft's role as producer of the platform on which nearly all desktop applications run also enables the software maker to distribute applications in a way that's not possible for third-party developers. For instance, Windows Media Player ships with every copy of Windows. RealNetworks' RealPlayer, on the other hand, does not.
Microsoft is so big on the desktop that application developers must target Windows before they attempt to target other operating systems. New hardware standards can't take off until they become part of Windows, and hardware OEMs must sell Windows-based systems because the operating system is the de facto standard. As long as running Windows applications is a requirement for a general-purpose computer, computer makers-which deal with very thin margins-can barely afford to offer alternatives.
Microsoft has amassed more than 5,000 patents to date, and the company's officials have made a practice of rattling its patent sabers at its rivals, particularly those in the open-source community.
Free open-source office suites such as StarOffice, OpenOffice.org and Zoho haven't begun to pull Microsoft off its pedestal yet. However, Web-based applications needn't rely on a particular operating system, and they can be accessed from many different devices. As these services grow in maturity and popularity, they could potentially level the application playing field enough to allow a combination of alternative platforms to loosen Microsoft's desktop grasp.