Inside the New Microsoft.

The article discusses changes at Microsoft Corp. Since the late 1990s, a host of challenges have threatened Microsoft's dominance. In addition to trends like market saturation of its products, slowing upgrade cycles and soft PC sales, Microsoft faces a rolling series of virus attacks that target flaws in its programs. The rise of open-source software and the Linux operating system have established a compelling alternative to Windows. And then there are the antitrust lawsuits. In March, the European Commission levied a US$613-million fine on the software maker and ordered it to unbundle the Media Player from its Windows operating system. In December, RealNetworks filed a US$1-billion claim against Microsoft for allegedly using its monopoly powers to control the digital media market. Now its antitrust woes are spreading to Asia: in recent months, Japanese and South Korean officials have raided regional Microsoft offices Microsoft is making a concerted effort to reach out to a diverse set of tech companies, including competitors. It has even gone so far as to settle long-standing disputes with Sun Microsystems. Microsoft has launched multiple initiatives to work with industry associations and standards bodies, as well as governments worldwide, to fight piracy, virus attacks and spam. Two people at Microsoft are symbolic of its new-found maturity: Craig Mundie and Brad Smith. Both have spent more than a decade at the company and are now its senior diplomats. On public policy and legal issues, they are the new face of Microsoft. But just as important is what happens on the Redmond campus, because Microsoft needs to control the complexity of its organization without snuffing out the entrepreneurial and innovative spirit at the grassroots level.