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Microsoft's primary business is operating system, but it is not the only thing they do.Microsoft is a good competitor of Goggle.People says same about yahoo, but yahoo is surviving till now.So I think Microsoft's business can be changed later but it won't die.
Yes, you're right. Microsoft will survive, but not in this kind. They will change the Company policy and they will change their priorities.
At the moment Microsoft is trying to save its empire but soon they will realise that this mission is imposible and they will stop.
IE for example can not be saved.When they will see that?