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California and the West

Google to sell suite of software

February 22, 2007|From the Associated Press

SAN FRANCISCO — Google Inc. will begin selling corporate America an online suite of software that includes e-mail, word processing, spreadsheets and calendar management, escalating the Internet search leader's invasion of technological turf traditionally dominated by Microsoft Corp. and IBM Corp.

The expansion announced Wednesday threatens to bog down Microsoft's efforts to persuade corporate customers to buy the latest version of its market-leading Office productivity suite that was developed along with Microsoft's new Vista operating system.

Google's software bundle, to be sold for a $50 annual fee per user, also poses a challenge to IBM's Lotus suite.

Although Google's latest entry into the corporate software market seems unlikely to topple the status quo right away, AMR Research analyst Jim Murphy said it was only a matter of time before the Mountain View, Calif.-based company became a major player.

"This is just the beginning," Murphy said. "The real impact of what Google is trying to do probably won't be evident for another five years."

Google has been offering a free version of its online software suite called Google Apps for the last six months. More than 100,000 small businesses and hundreds of universities nationwide are using the free service, Google said.

The fee-based version, Google Apps Premier Edition, includes five times more e-mail storage -- 10 gigabytes per e-mail box -- as well as a guarantee that all services will be available 99.9% of the time and backed by around-the-clock technical support. Google also is adding mobile access to e-mail accounts through BlackBerry devices.

By dangling its business software package at such a low price, Google is giving companies a greater incentive to delay buying Microsoft's Office 2007 as they assess the pros and cons of a less-expensive alternative, Nucleus Research Inc. analyst Rebecca Wettemann said.

"The timing [of this offer] is just brutal for Microsoft," Wettemann said. "It's definitely a shot across their bow."

Google executives downplayed the company's intensifying rivalry with the world's largest software maker.

"We are not in this to get Microsoft," said Dave Girouard, general manager of Google's business software division. "We are in this to offer more compelling choices for consumers and businesses."

Microsoft welcomes the competition, said Kirk Gregersen, the Redmond, Wash.-based company's director of the Office suite. "It helps keep us on our toes."

If it can sell more software to companies, Google could become less dependent on online advertising. Google already has been selling its search technology to companies, but that initiative has only had a modest effect. Software licensing accounted for slightly more than $100 million, or 1%, of Google's $10.6 billion in revenue last year.

Microsoft, in contrast, relied on software sales for most of its $44 billion in revenue last year.

Google shares rose $3.76 to $475.86.

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