Some folks seem to think Microsoft was humbled by its legal and technology challenges in 2004. But I disagree. I don’t see a kinder or gentler Microsoft emerging in 2005. More transparent, maybe. Down for the count? Heck, no!

After watching the Softies for two decades, I can tell you they are hardly ready to roll over. There’s still a lot of plotting and scheming happening in Redmond’s hallowed halls. And that will make the coming year anything but predictable. Nonetheless, predict, I will try.

I have a tough act to follow, given how surprisingly accurate I was in my 2004 predictions. Either I just made my guesstimates too obvious, or I was lucky (or both). I predicted no Yukon or Whidbey until 2005; no Longhorn until 2006; no Microsoft CRM 2.0 in 2004 (check); and that Microsoft would create a new program to undercut Linux in international markets (check — Windows Starter Edition).

(Pat, pat. Sound of Microsoft Watcher patting herself on the back.)

But what about 2005? In the past, it was as easy as taking candy from a baby to predict correctly that the Redmondians would miss many of their ship targets. But now that the company has moved to a new policy of publicly acknowledging feature cuts designed to get promised wares out the door, Microsoft ship dates are less likely to become slip dates.

With that aside, what will be the big Microsoft milestones in 2005? Here are my best guesses:

1. The European Union antitrust remedies will be ineffectual, and ultimately, overturned.

Who is going to want to buy a product known as “Windows XP Reduced Media Edition” that will cost the same as the full Windows XP release but not include as much functionality? This thing’s going to make Windows Millennium Edition look like a runaway best seller. And that will be just the tip of the iceberg. Given its past track record in convincing authorities that Microsoft the Monopolist is not doing anything illegal, Microsoft will ultimately prevail in having the EU remedies stayed and, some time in the next five years or so, overturned.

2. Microsoft will pay off Novell and Real Networks, as part of Redmond’s campaign to clean up its lingering lawsuits.

Novell must have considered Microsoft’s $500-million-plus settlement with the company inadequate. Why else dredge up a lawsuit over incidents that occurred almost a decade ago? Real Networks must be holding out for more cash, too, as it has yet to settle its antitrust claims with Microsoft. Could Real’s Rob Glaser be angling for a deal like the one cut by Computer and Communications Industry Association chief Ed “Take the Millions and Run” Black?

3. Microsoft will add a handful of new countries to its XP Starter Edition program, while continuing to insist that it is seeding international markets for humanitarian, not competitive, reasons.

So far, there are five stripped-down, cut-rate Starter Editions on the market: In India, Indonesia, Malaysia, Russia and Thailand. We expect to see a handful more in the coming year, but with fewer mentions of Linux and piracy attached to them. Microsoft says Starter Edition versions are for users who’ve never owned a PC before. But it’s worth noting that the Starter Edition concept didn’t get its start until Linux began making inroads into this entry-level market.

Read the full story on Microsoft Watch: Microsoft’s Top 10 Milestones for 2005