REDMOND, Wash. -- Microsoft Corp. plans to unveil a new Internet search engine today, stepping up a challenge to market leader Google Inc.
The test version of the program took 18 months and more than 100 developers to create.
A final version of the search service might not be released this year. An earlier test version shown in July was similar to Google, said John Tinker, an analyst at ThinkEquity Partners in New York. In the meantime, Google beat MSN to the market with a program for finding files on personal computers.
Microsoft also is challenging Yahoo Inc., owner of the No. 2 search engine.
Microsoft is playing catch-up to Google, a six-year-old company that runs the most-used tool for searching the Web. The world's largest software maker spent as much as $300 million on the project to build a product to hobble Google and lure away advertising revenue, said Rob Enderle, an analyst at Enderle Group.
"I don't think people see Microsoft as a serious competitor in the space for a while," Tinker said. "That said, over a period of time, Microsoft's record is stunning at figuring it out."
Justin Osmer, group product manager at MSN, the Microsoft unit developing the engine, declined to comment.
Microsoft has spent $8 billion on MSN in the past four years. The unit, which lost more than $1 billion in fiscal 2002 and 2003 combined, posted its first annual profit in the most recent fiscal year, bolstered by more than $1 billion in ad revenue.
MSN's sales of $540 million in the most recent quarter compare with Microsoft's $9.19 billion in total revenue.
With a compelling product, Microsoft could take half of Google's $1.47 billion in search revenue, Enderle said.
The new search service is the first from MSN to run on Microsoft's technology. MSN's current search program relies on software from Yahoo, limiting Microsoft's ability to upgrade the program.
MSN and Yahoo are chasing Google in an effort to tap advertising revenue attached to the programs.
Google first sold shares to the public Aug. 19 in a $1.67 billion offering. The shares, which have almost doubled since then, fell 84 cents to $167.86 yesterday on the Nasdaq stock market. Microsoft dipped 4 cents to $29.73.
Microsoft Chief Executive Officer Steve Ballmer told shareholders at the company's annual meeting Tuesday that Microsoft will catch up to Google, allowing the company to more than double MSN's ad revenue in the next five years. "We will catch up," he said. "We will surpass."
The Wall Street Journal reported the release of the new search program Tuesday. David Krane, a Google spokesman, declined to comment.
Google released its desktop search engine Oct. 14. The new Microsoft search engine doesn't have that capability, said people familiar with the matter. Microsoft plans to release a desktop search test version this year.
The technology that underlies Internet searches is being expanded for use in finding files, e-mail and documents buried on a user's computer or stored on a large corporate network.
Microsoft should prevent Google from controlling the market for search tools and services, Enderle said. "Search is a linchpin of technology right now, so losing that weakens Microsoft," he said.
