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Fast Forward
A Google-Microsoft alliance?
Could Apple-envy force tech's archenemies to join forces?
By David Kirkpatrick, FORTUNE senior editor


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NEW YORK (FORTUNE) - It seems absurd to say they could become allies -- Google and Microsoft are increasingly archenemies. But there is one company both envy, one whose growing success could change everything -- Apple.

Its integrated software-device-store model for media is so far ahead of everyone else that there is no number two. Microsoft (Research) cites the iTunes/iPod combination as a paradigm for the kind of product set it wants to offer going forward, in which a service generates ongoing revenue in combination with software on a PC, and a mobile device.

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And Google (Research)'s big news at last week's CES show was its so-far underwhelming video downloading service. Apple (Research) is already way ahead -- transitioning deftly to add video to its music offerings, including the popular video iPod.

I don't really expect Google and Microsoft to fall into one another's arms any time soon, but Apple CEO Steve Jobs' continuing ability to dazzle not only customers but also Wall Street and beyond has ramifications throughout the tech world.

Expect the unexpected

Alliances will shift to counter the growing influence of this unique company, as they have in the past. After all, Jobs Tuesday launched the new Intel-based Macintoshes -- who would have guessed before the two companies announced their alliance last June that such a thing might happen? It's a consummately unpredictable industry.

Now that the Mac is on Intel chips, the entire landscape shifts. Michael Dell told FORTUNE last June that his company would sell computers with Apple's Mac operating system if it could. His interest must be heightened by now -- analysts believe some of Apple's sales gains are coming at the expense of Dell.

Jobs said Tuesday he won't impede individual users who want to run Windows on the Intel-based Macs, though he's shown no interest, at least publicly, in licensing the Mac OS to companies like Dell. But now customers will no longer have to make a painful choice between Windows and Mac. If you need to run Windows but love the Mac you will be able to use one. And every PC company will, in effect, begin to compete head-on with Apple in PCs. Since none come close to matching Apple's industrial design and software, that could be challenging.

Apple's business today is a unique synthesis of fashion and function. That is a powerful combination so long as both parts can be sustained. It is astonishingly easy and enjoyable to use the Mac and Apple's other hardware and software products, all of which are tightly integrated. And that is exactly what potentially threatens not only Google and Microsoft, but Yahoo, AOL, MySpace, and even Comcast, Verizon Wireless and Tivo -- any company that aims to build electronic entertainment or productivity-related services for consumers.

If Microsoft and Google were ever to work together, it would likely be in hopes that they could better develop such services on Windows-based PCs together, to build allure approaching Apple's on the Mac. If I were at Microsoft, I'd see Google as my best potential partner in such an effort. It is the only company whose coolness matches Apple's.

Of course there's always a possibility that Apple itself might mess up. In an interview with Business Week, Harvard Business School professor and author Clayton Christensen recently said that he thinks Apple is poised for a fall. His main argument: "during the early stages of an industry," customers want proprietary solutions like Apple's today, which "knit" all the parts of a problem together. But he thinks with the further emergence of standards, over time Apple's businesses will mostly turn commodity-like and the solutions more modular. That might erase Apple's advantage, he believes.

But Christensen's error is in thinking that there is an "industry" in which Apple operates. Since Jobs returned to the company, its innovations have increasingly been across conventional industry lines, creating aggregate products that simply serve customers better. Tech's role in our lives is now so fluid that a company like Apple which has a clear understanding of what works for customers is likely to retain an advantage.

The iPod is the centerpiece of Apple's current surge. But it is helping further revive the Mac, which itself is at least as different from Windows-based PCs as the iPod is from its music-player competitors. It remains to be seen whether other tech players can do what it takes to fight back.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.