Microsoft wants to buy the company for $44.6 billion as its way to compete with Google, the hot company of this decade, which was also founded by Stanford graduate students who became media darlings and instant billionaires after an exhilarating initial public offering.

“This is the very nature of the Valley,” said Jim Breyer of the venture capital firm Accel Partners. “After very strong growth, businesses by definition start to slow as competition increases and young creative start-ups begin to attack the incumbents.” The economist Joseph Alois Schumpeter had a name for this principle of capitalism: creative destruction. Perhaps nowhere does it play out more dramatically — and more rapidly — than in Silicon Valley, where innovation unleashes a force that creates and destroys, over and over.

Microsoft, at the still-young age of 32, is making its largest acquisition because it, too, is affected by this force. Founded in 1975, Microsoft has had a longer run than most tech companies largely because it became very good at chasing the next big thing: an operating system, point-and-click computing, software for servers, Web services, video games, and, most recently, Internet search and online advertising. Technological innovation may not have always been what gave Microsoft the edge. It has been frequently criticised for me-tooism and for getting it right the third time.

Sometimes, marketing skill and bullying seemed also to be keys to its success. (To be fair, the creative use of those skills can also be regarded as a form of innovation.) Microsoft won huge business battles, starting with its domination of personal-computer software against Apple during the 1980s.

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