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Researchers Outline Microsoft's Top 10 Challenges For 2004: Page 2 of 4

RealNetworks last week filed a lawsuit alleging that Microsoft balked at providing it information on Windows' application programming interfaces (APIs), and has said that the damages it seeks could climb above $1 billion.

"If Microsoft isn't answering Real's API questions, and that's not the mark of a mature company," Cherry said. "A lot more lawsuits like this will come from that kind of activity and attitude."

Microsoft must also address this maturation issue if it's to continue to boost revenue, other Directions on Microsoft analysts said.

"Microsoft still has the same basic business model as it did in the 1990's, a model that is largely predicated on creating software grand slams that compel customers to upgrade," said lead analyst Paul DeGroot. That's the reason why the company has been pouring so many of its development resources into Longhorn: it's looking for that next big hit.

Such a strategy, however, is increasingly showing serious signs of aging. "Short of selling customers on product upgrades, Microsoft hasn't found an effective way to convert its installed base advantage into a steady revenue stream."