Google, Sun Microsystems form alliance

No. 1 search engine will offer Sun's OpenOffice software in direct challenge to Microsoft

October 05, 2005|By BLOOMBERG NEWS

MOUNTAIN VIEW, Calif. -- 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 news conference yesterday in Google's hometown. Some downloaded Sun programs will include Google's toolbar.

The alliance may present one of the strongest competitors to 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 the Google toolbar, e-mail and desktop search.

"This really should be seen as competition heating up between Google and Microsoft, with Sun providing the ammunition," said Michael D. Cohen, an analyst with Pacific American Securities LLC of San Diego, which 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 Sun initially rose yesterday but settled a penny higher amid concern that the company 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 shares surged 6.6 percent Monday in anticipation of the announcement, but gained only 0.01 percent to close at $4.20 yesterday after rising to $4.56 during the day.

Google dropped $7.68 to $311, but has climbed 61 percent this year. Microsoft fell 52 cents yesterday to $24.98.

"We need the benefit of their brand," Sun President Jonathan I. Schwartz said in an interview after the news 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."

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 to attract users and advertising dollars.

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," he said.

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