October 4, 2005
Google, Sun in Challenge to Microsoft
MOUNTAIN VIEW, Calif. -- Google Inc. took a step toward challenging Microsoft Corp.'s dominance of computer software with the announcement Tuesday of a collaboration agreement with Sun Microsystems Inc.
The move could lead to Google offering next-generation word processing, spreadsheet and collaboration tools that would take on Microsoft's industry-leading Office suite of software.But for now its significance may be mostly as a symbolic shot across Microsoft's bow, signaling Google's intention of attacking the world's biggest software company head on.
Aside from a plan to offer Google's toolbar program with downloads of Java software, details of the agreement were scant. Though it could lead to a new pipeline for Sun software to millions of computers, there was no firm commitment.
Some downplayed the announcement as a publicity stunt that probably would not have occurred had Google CEO Eric Schmidt not spent 14 years of his career working at Sun under CEO Scott McNealy.
The alliance would be a boon for Sun if Google had promised to buy some of the company's sophisticated computers, but no ironclad commitments were announced.
"There really isn't much depth to this partnership," said industry analyst Rob Enderle.
"I think Eric is doing this as personal favor for Scott," he said. "It provides a certain amount of press and visibility to Sun when there hasn't been very many positive things going on at the company."
Sun's shares edged up a penny Tuesday to close at $4.20 on the Nasdaq Stock Market, where Google's shares fell $7.68 to finish at $311. Microsoft's shares lost 52 cents, or 2.04 percent, to close at $24.98.
As part of the agreement, Sun will offer Google's search toolbar with downloads of its free Java software, which is required to run a variety of Web-based applications and works with multiple operating systems.
The two companies, which did not disclose terms of the deal, said they also agreed "to explore opportunities to promote" other Sun technologies, including the freely available OpenOffice.
OpenOffice, an offshoot of Sun's StarOffice, is a leading challenger to the ubiquitous Office suite, a major cash cow for Microsoft. Both offer a word processor and spreadsheet among other applications.
"OpenOffice is already an alternative, but if Google gets involved in supporting it, that could be the thing that puts it over the top," said Forrester Research analyst John R. Rymer.
Neither McNealy nor Schmidt would say when or how Google might distribute Sun's software. Both said the Google toolbar option for Java downloads - the toolbar provides quick access to Google search, spell checking and a popup-ad blocker - is just a first step in a significant agreement.
"We only want to talk about what we're talking about here now ... we expect more," McNealy said.
Microsoft did not immediately comment.
OpenOffice could provide a vehicle for Google to diversify its sales, which are driven almost exclusively by online advertising. So-called office productivity software generates more than $10 billion in annual sales, estimated Citigroup analyst Mark Mahaney.
"We believe this creates a potentially interesting new revenue opportunity for Google," Mahaney wrote in a research note Tuesday.
The deal could eventually boost the fortunes of programs that work on multiple operating systems, eating into Microsoft's profits from its dominant Windows computing environments.
Increasingly, many of the applications that computer users value most - such as news and weather tickers - run as Web services independent of the operating systems on their computers.
Java is a backbone of those Web services, along with Microsoft's .NET architecture.
Since it was launched a decade ago, Java has been used to power Web-based applications, standalone programs, cell phones and other gadgets across a variety of computer operating systems.
A key component of Sun's decade-old Java, its application-running platform, was the source of one of many rifts between Microsoft and Sun over the years.
Sun first sued the world's top software maker in 1997, claiming the Redmond, Wash., company rewrote elements of Java specific to Windows. Later, Microsoft said it would yank Java entirely from its ubiquitous software.
The wrangling ended in spring 2004, when the companies surprised the world with a $1.95 billion settlement and 10-year collaboration agreement.
Both Sun and Google share the common root of Stanford University. Sun - short for Stanford University Network - was founded there in the 1980s, while Google got its start there in the 1990s. And one of Sun's co-founders, Andy Bechtolsheim, gave Google's Larry Page and Sergey Brin $100,000 in 1998 to incorporate their young search company.
Sun has lost $4.5 billion since June 2001, although the Santa Clara, Calif.-based company has recently started to show signs of recovery.
While Sun has been struggling, Google's fortunes have steadily risen. Though best known as a search engine, it now offers free e-mail, maps, instant messaging, video and last week announced it wants to provide free Wi-Fi to San Francisco.
AP Business Writers Michael Liedtke in San Francisco and Alison Linn in Seattle contributed to this report.
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