During its annual analyst meeting Microsoft Microsoft vice president Yusuf Mehdie demoed a new search engine that seeks out information beyond the Web and onto the hard drive. Mehdie showed off a prototype of the technology that was integrated into the MSN Toolbar add-on for Internet Explorer.

Microsoft's public disclosure of this new technology comes just days after Microsoft's MSN business unit launched a beta of its Newsbot, a cooperative venture with longtime partner MSNBC that scours through over 4,800 news sources. MSN is also in the process of developing its own algorithmic search engine to replace one licensed from Inktomi.

There is a multitude of reasons why Microsoft is so interested in search engine technology. In today's computing ecosystem massive storage is cheap, digital media is plentiful and the lines that segregated where the desktop ends and the Internet begins are dissolving. But there is one setback: finding contacts, pictures, e-mail, music and documents is increasingly difficult. Seeing this as an emerging problem that needs to be solved, solution providers including Google and Yahoo! are already seeking to act.

In the race to develop innovative new search technologies, Google and Yahoo! are no longer alone since Microsoft came to the realization that without an appropriate search mechanism it cannot keep up with the times and could miss out on opportunities for growth. So, in response to its late entry into the market, Microsoft has invested heavily in developing its own brand of search technologies - making it a high priority.

As a result, Google, the online search market leader, is widely believed to be public enemy number one in Redmond and Microsoft is devising a competitive strategy.

"Microsoft's responding to a threat from Google by building an application that takes advantage of Microsoft's presence in areas where Google has no presence--desktop apps, networks, the local e-mail store, and so on. But it's not pursuing the Netscape strategy--at least not yet. We'll see what Longhorn looks like," Directions on Microsoft Senior Analyst Matt Rosoff told BetaNews.

Longhorn, the highly anticipated next generation of Windows, will have search functions baked into its file system. Longhorn's storage service, code named WinFS, advanced the Windows file system so that it is an integrated store for relational data, data on files, and XML metadata. This opens the door for new ways to search within Windows to make it "search centric".

WinFS is codependent on future SQL Server and Visual Studio products called Yukon and Whidbey. Delays in these products are rumored to have caused Microsoft to scale back more ambitious plans for WinFS that take the service beyond individual desktops.

Critics of Microsoft have alleged including rich search technologies into Windows mirrors the integration strategy that was used to lock in the Internet Explorer Web browser as a de facto standard and topple Netscape.

"Even if Microsoft were pursuing the Netscape strategy to beat Google, I doubt this would attract U.S. regulators. According to the highest ruling authority in the DoJ case, there's nothing illegal about the Netscape strategy per se," said Rosoff. "In other words, Microsoft legally has the right to add a 'ham sandwich' to Windows (to quote Ballmer) as long as they don't strike deals with OEMs, IHVs, ISVs, and so on, to give unfair consideration to their ham sandwich in exchange for money or price cuts on Windows."

However, Rosoff did not rule out the possibility that upcoming Windows search technologies from Microsoft may attract the attention of regulators in Europe.

Whatever its implications, the technology currently showcased by Mehdi differs significantly from the "Netscape strategy" and Microsoft's practice of bundling Windows Media Player because it is not a part of Windows. Likewise, it does not expose any APIs that developers can use to build on top of. It is unknown whether or not a form of the technology will find its way into Longhorn.

A Microsoft spokesperson denied that it was gunning for its competitors, stating, "Our focus has been and will continue to be on building a search service that answers customer's questions. It's not about looking at competitors; it's about building great software for our customers."

The spokesperson continued, "MSN has updated its search user interface to enhance the online experience in response to overwhelming customer feedback. We are delivering customers an experience they have asked for. We believe the combination of a clean look that provides fast and easy access to the information people want will be a winner."

Representatives from Yahoo! and Google could not respond by press time.