Microsoft faces several challenges this year and could end up fighting for its very existence in a US High Court against the US Department of Justice (DoJ).
As for the anti-trust trial, Microsoft is currently in limbo waiting for Judge Jackson to set a date to determine whether it has actually acted unlawfully.
There have been reports that pressure may have been put on Gates to step down as chief executive officer following his history of conflict with the DoJ. Gates came across as almost arrogant when questioned on the particularly aggressive nature of Microsoft's business practices.
There are also rumours that the DoJ is considering ways to split the software company into a systems supplier and an applications house. If the worst happened and Microsoft were divided this way industry experts believe the game of musical chairs being played out at the top of the company would leave a diverged Microsoft in an extremely beneficial position.
Simon Moores, chairman of the Windows NT Forum said, "If Microsoft was split, the new company could be run by Gates and Ballmer would continue running the old Microsoft."
The threat to Microsoft from application rental is very real. In his new role Ballmer discussed a strategy for the company called Next Generation Windows Services which involves providing software as a service to end-users. Michael Gartenberg, vice-president of analyst GartnerGroup, said, "This vision is just a vision, without details and without identified deliverables."
Microsoft has plans to provide just-in-time software delivery, making its applications available for rent over the Internet or via ASPs. But Gartenberg argued that Microsoft's large monolithic applications are ill-suited to the software distribution model which the company has envisaged.
Application renting frees users from the constraint of having to run their software using Microsoft operating systems. Microsoft has also lost out in mobile computing where 3Com with PalmOS, Psion with Epoc and the Symbian alliance have strong alternatives to Windows CE.
With the pending judgement on the anti-trust lawsuit, rival operating system and the burgeoning ASP industry to contend with, industry experts feel Ballmer has his work cut out.
The operating system becomes irrelevant. In fact, as Rob Hailstone, of analyst group Bloor Research, noted, "When the user does not see the operating system it does not matter which server or which client is being used."
For cost-conscious users, the ability to rent free software, such as Sun's Star Office, could be very attractive compared to renting Microsoft Office, where the cost of the software licence would be passed onto the user.