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Google makes move onto Microsoft's business turf

Ben Charny
MarketWatch

SAN FRANCISCO - Google Inc. on Thursday made its boldest move yet to challenge Microsoft Corp.'s flagship Office brand of business computer programs.

The Mountain View, Calif.-based company now sells Google Apps Premier Edition, an array of Internet-based data storage, communication and collaboration programs aimed at businesses. The features, which cost $50 a year, come with extended tech support.

The new product is aimed squarely at Microsoft. In offices around the world, Microsoft's Word document maker, Excel spreadsheet creator and Outlook e-mail are ubiquitous.

Google is positioning its Premier Edition as a low-cost alternative to Office, which has about 450 million users.

"With Google Apps, our customers can tap into technology and innovation at a fraction of the cost of traditional installed solutions," said Dave Girouard, vice president and general manager of Google's enterprise division, in a written statement.

Google's Premier Edition is a combination of its Gmail e-mail, Google Calendar day planner, Google Spreadsheets and Docs creator, Google Talk instant messaging and Internet telephony service, which are all freely-available.

There's also a customizable Web page that uses a Web address of someone's own choosing, and 10 gigabits of data storage, which Google claims is about 100 times the storage capacity of an average corporate e-mail in-box.

Google's offering was expected, and has been rumored since at least August, and analyst reaction has been mixed. Shares of Google closed down fractionally at $475.85 while Microsoft rose 0.1 percent to $29.39.

At Merrill Lynch, analyst Kash Rangan gave Google a chance of denting Microsoft's $11.7 billion-a-year business selling office software.

"Google is starting to encroach on Microsoft turf, particularly in the small- and mid-sized business segment," he said in a note to clients at the time. "However, it will likely take Google a number of years to match Microsoft's deep functionality and integration."

Google's new suite of office products is shaping up to be Microsoft's worst nightmare, according to analysts at the Yankee Group.

"Bill Gates's greatest fear has always been the next Bill Gates. Google's Larry Page and Sergey Brin may very well have turned that fear into reality," wrote Zeus Karravala, the Yankee Group's senior vice president, in a research report released Thursday.

Kirk Gregersen, director of Microsoft's Office team, acknowledged the growing competition between the companies.

"We've had a lot of competition in this industry for a long time," Gregersen said. "We view it as good for customers and good for us because it keeps us on our toes."

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