Is Microsoft losing their edge to competitors?

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@noslodecoy: "Yet" would indeed had clalified it a bit, but i'd still argue.
Google have grown big enough to have some control over the content already. And we already are in a situation, where a heavy OS is obsolete for most users needs. Even if Google wouldn't have any effect to operating systems, a situation where "Google web apps" and "Micro$oft web apps" are put up against; using the Google tools could show your site in top ten in Google search and M$ equivalent put you somewhere around the place 37 million in the results.
Since the web browser is the key interface between user and web content, it's irrelevant whether Windows supports the application or not. If you run into content that is not supported by Internet Explorer, you'll be shown similar "upgrade" link to Chrome/Firefox/Opera that you see on flash applications if you don't have a compatible version. That would force M$ to follow others standards (namely Google), instead of having control over the content which others would be forced to follow. Once Windows would be just a platform among the others in its key areas, it would mean the end to Windows dominance, sure it would still have the biggest market share in operating systems, but the point is, that how much would the OS sales go down overall.

There may be a Windows OS for every hardware you can imagine, but so is Linux equivalents and hardware manufacturers own systems. Every other hardware, outside PC, Windows nees to compete with every other option and as we know, M$ isn't very good in competing.
There isn't coming a successfull Linux-PC from the existing PC manufacturers, such as HP, because their Windows-PC business is so big and M$ practically has a stranglehold on them, since they do their business with Windows PC:s. Like the latest example with Asus shows; just when they got their eee model out, Asus announced they phase out the Linux due M$ pressuring them.
So the current situation isn't because of Windows being a competetive system, but because of its virtual monopoly, which offers M$ its strangehold. Now, stuff like mobile phones, set-top-boxes, gaming consoles, DVD players and all the other electronics, where you could implement internet connection, and their manufacturers don't need to care about Micro$oft or what they think about the electronics manufacturers actions.

In the end, all i'm pointing out is, that the competition between M$ and Google is a lot more harsh than what it seems. After all, you can see Googles importance to M$ by looking at their 45 billion bid for Yahoo.