Google Inc., the world’s most-used Internet search engine, and Sun Microsystems Inc. joined forces to offer online word processing and spreadsheet functions in a direct challenge to Microsoft Corp.’s Office products.
Google will distribute Sun’s OpenOffice software for personal computers, the companies said at a press conference in Google’s home town of Mountain View, California today. Some Sun programs will also include Google’s toolbar when they are downloaded.
The alliance may present one of the strongest competitors to Redmond, Washington-based Microsoft’s dominance in word processing and spreadsheets, which generated $11 billion in sales last fiscal year. Google is using Sun to accelerate its battle with Microsoft, adding a missing piece to its growing list of features that includes e-mail, desktop search and Internet phone calling.
“This really should be seen as competition heating up between Google and Microsoft, with Sun providing the ammunition,” said Michael Cohen, a San Diego-based analyst for Pacific American Securities who owns shares of Sun.
The companies didn’t say how Google will deliver the programs, or whether or when they will be available on Google’s sites.
Shares of Santa Clara, California-based Sun, also the No. 3 maker of server computers that run Web sites and corporate networks, pared gains on concern that Sun wouldn’t get a revenue boost from the deal because OpenOffice is free software. Google will pay Sun each time a Sun customer downloads the Google toolbar.
Sun recently completed its $4.1 billion acquisition of Louisville, Colo.-based Storage Technology Corp.
Sun shares surged 6.6 percent yesterday in anticipation of today’s announcement. The stock rose 3 cents to $4.22 at 3:15 p.m. today in Nasdaq Stock Market composite trading.
Google dropped $6.08 to $312.60 and had climbed 64 percent this year. Microsoft fell 56 cents to $24.94.
Mutual Need “We need the benefit of their brand,” Sun President Jonathan Schwartz said in an interview after the press conference. “They need the benefit of our technology.” OpenOffice.org is an open-source product that is compatible with all major office products. It is free to download, use and distribute, according to Sun’s Web site. As well as a rival product to Microsoft’s Word and Excel, it has a “presentation manager” program to compete with PowerPoint.
“This is the thin edge of a large, powerful wedge,” said Michael Dortch, an analyst for technology consultants Robert Frances Group. “Sun and Google pulled back the corner of the entrance flap to what could turn out to be a huge tent.” Reunion The announcement reunites Google Chief Executive Officer Eric Schmidt with Sun CEO Scott McNealy. Schmidt worked for Sun from 1983 to 1997 in various posts, including chief technical officer.
The alliance comes 18 months after McNealy and Microsoft CEO Steve Ballmer patched a feud and agreed to make their products more compatible. Microsoft also agreed to pay Sun almost $2 billion to settle legal disputes.
At Google, Schmidt is pushing further into Microsoft’s territory. The company has moved beyond Internet search, where it leads Microsoft and Yahoo! Inc., into desktop search, allowing users to plow through all files on their PCs. Google has added e- mail, a product officials have touted as a possible alternative to word processing functions.
Google had 2004 sales of $3.19 billion, a 37-fold increase from 2001 as advertisers seek to place their ads next to search results. Added features from Google are helping drive users, and advertising dollars.
Lending Credibility Sun and Google are betting that users will soon demand that they gain access to their files from anywhere, just like Internet e-mail, Dortch said.
“For Sun, a partnership with Google lends a lot of credibility,” Dortch said.
Sun said the deal may help revive revenue. Sun hasn’t increased sales or posted an annual profit in the past four fiscal years. Sun’s servers run on its own Solaris operating system, a competitor to Microsoft’s Windows, which runs about 95 percent of the world’s PCs and about two-thirds of servers.
Sun released its latest paid version of the OpenOffice program, called StarOffice 8, on Sept. 27. Sun charges for that version because the company has to pay fees for items such as fonts. The company touted it as being able to work with Excel, Word or PowerPoint.
The StarOffice suite is cheaper than Microsoft’s Office, retailing for $99.95 and offered for download on the Web $69.95.
Business customers are charged $35 a user.
A Microsoft Office Basic suite starts at $149, according to the Web site of Dell Inc., the world’s largest maker of PCs.
Microsoft Office represents 28 percent of the company’s sales. The unit provided $7.92 billion in profit, or 54 percent of the company’s profit in the year ended June 30.
