Bill Gates loves Waterloo, Ont., particularly computer science and engineering students at the local university. In a talk/recruiting drive yesterday, he extolled about the exciting prospects for the industry and how the software giant is well-positioned. "Software is the place where the action is", he enthused. As an ardent believer in the proliferation of Web-based services, I wonder how Microsoft will do given it's still a desktop-centric software company. My take is it's the browser where the action is happening rather than the OS as more people gravitate to online services and applications. In a column in today's National Post, I contend Microsoft risks falling behind Google, AOL and Yahoo as we head into Web 2.0 or whatever you want to call it. This take solicited an e-mail arguing Microsoft is right in the middle of the action with an online portfolio that includes MSN, Hotmail and instant-messaging (an application enhanced with the recent agreement with Yahoo). Maybe as someone who hasn't used IE for years, I've got a bias against Microsoft even though I still use Outlook, Windows and Office. Maybe I'm under-estimating Microsoft's ability to change (Titanics can change directions, right?). Maybe I'm simply caught up in the hype surrounding Google, even though it's still a one-trick pony (search/paid-placement). Maybe I've never recovered from a disastrous interview with an uninspired and frazzled Gates several years ago in the back of a limousine. When it comes to Microsoft, I'm on the fence to see if an old dog can learn new tricks.