Microsoft CEO Steve Ballmer, in Tokyo to launch the new Windows Live services, said that Google was only ahead in terms of search.
Microsoft has this week launched its Windows Live programming package for e-mail, instant messaging, blogging and photo-sharing.
Google has also this week launched its free software package for mobile devices, Android, scheduled to hit the market next year.
Google is offering its technology to handset manufacturers so consumers will be able to use Google's search engine, e-mail and maps on mobile devices as easily as on personal computers.
Ballmer said it was difficult to comment on Google's mobile plans because they were still "just words on paper" that had yet to begin.
Ballmer also acknowledged Microsoft expects to continue to lose money in its global online business for some time.
Although a dozen Japanese companies have signed on as partners for Windows Live, the momentum is clearly with Google.
Microsoft is fighting hard, but Google's continued innovation and business diversification is going to make it difficult for Microsoft to keep up.
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