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CNET News.com: Microsoft hatching online plans for Office

Sep 21, 1999, 23:33 (8 Talkback[s])
(Other stories by Erich Luening, Mike Ricciuti)

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"As more portal sites add free or low-cost business applications to their services, Microsoft finds itself in an awkward position: The software giant needs to launch a Web-hosting model for its Office desktop productivity software to counter competitors and maintain its huge customer base. It also needs to set prices that keep Office's enormous revenues--one-third to one-half of the company's total--rolling in.

In a sense, Microsoft finds itself in the same position Netscape Communications encountered a few years ago as it attempts to sell software that others are giving away. Netscape, which led the Web browser market by a huge margin with its for-fee Navigator software, eventually gave way to Microsoft's free Internet Explorer.

In the short term, analysts expect Microsoft to take a hit. 'This [move to Web-hosted applications] represents both high risk and high opportunity for Microsoft,' said Rob Enderle, an analyst with Giga Information Group. It 'will require that they cannibalize their existing revenue and channels to get ahead of this emerging trend, and...it will likely have a short-term, adverse impact on earnings.' "

"Several competitors, including Sun Microsystems, Corel, and Lotus, along with Web portal-like start-ups such as Desktop.com, are way ahead of Microsoft in announcing plans for Web-based applications."

"...Enderle sees the threat to Microsoft as real. 'They are faced with the same problem they gave to Netscape, in the form of a free bundled office suite from Sun. It will be interesting to see if they do a better job of defending their market than Netscape, which wasn't being attacked by the federal government, did.' "

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