Bill Gates admits to letting Google grab the Web-search lead. Now that Redmond has fired up its own engine, he aims to change that

Few people are harder on Microsoft's missteps than its own chairman. So when TV personality Charlie Rose asked Bill Gates during an on-stage interview at the World Economic Forum in Davos, Switzerland, on Jan. 28 why Redmond initially relied on technology from others for its Web-search business, Gates didn't mince his words: "We were stupid as hell." Microsoft gave itself a quick education. After just 20 months of development, it launched a new Web-search service on Feb. 1, built from the ground up with homegrown technology. MSN Search, which replaces technology licensed from Yahoo! (YHOO ), is available in 10 languages and includes tools to help Web surfers refine queries for more relevant results. It also taps Microsoft's Encarta encyclopedia software to provide direct answers to specific questions. GOOGLE SLIP IS SHOWING. "We're going after the core problem, which is customers saying they can't get their questions answered," says Yusuf Mehdi, Microsoft vice-president.