Transcript

TANYA NOLAN: Microsoft's global dominance in word processing software is under threat from a new coalition.

The Silicon Valley-based Google and Sun Microsystems have announced a formidable alliance.

They plan to make word processing and spreadsheet programs available on the internet, in a direct challenge Microsoft.

Industry observers say increased competition in the global software market will be good for consumers.

Brendan Trembath reports.

BRENDAN TREMBATH: Most of the world relies on Microsoft Word for word processing, which is why the prospect of software giant, Microsoft, facing tougher competition is getting a lot of attention on Wall Street.

The company's stock dropped more than two per cent on this news.

(US news excerpt)

AMERICAN NEWS ANCHOR: Internet search giant, Google and network computing company, Sun Microsystems have entered into a multi-year agreement, to distribute some software.

CEO Scott McNealy says the company wants to leverage economics and other things.

SCOTT MCNEALY: And we want to leverage those downloads.

(end excerpt)

BRENDAN TREMBATH: Two big names in California's Silicon Valley, Google and Sun Microsystems have formed an alliance, taking on industry leader Microsoft in the multi-billion dollar market of word processing and spreadsheet software.

Such an alliance, taking on the world's dominant software seller, is an important development says computer industry observer, Marc Phillips.

MARC PHILLIPS: It certainly sends a message to Microsoft that Google has entered their space. Their homeland of applications in word and excel and you know, Google's got a phenomenal rapport with its customers, it's new.

BRENDAN TREMBATH: The terms have not been revealed but many observers believe it will be positive for consumers.

Ed Black is the Chief Executive of the Computer and Communications Industry Association in Washington DC.

ED BLACK: Anything that creates real competition winds up benefiting the average consumer and the public in general because you know, people can, when they're feeling competition, they run a little harder, they work a little tougher.

BRENDAN TREMBATH: The Computer and Communications Industry Association counts Sun and Microsoft among its many members.

It puts Chief Executive Ed Black in a tricky position.

ED BLACK: We don't really take sides, we just think that the dynamic created by multiple players aggressively competing is good for the industry overall and definitely good for the public.

BRENDAN TREMBATH: Sun Microsystems may find a bigger market for its business software OpenOffice. It offers many of the same functions as widely used Microsoft software.

In Australia this morning a standard version of Microsoft Office was retailing for about $600. But a basic version of Sun's OpenOffice is free. It can be downloaded from the internet, saving a trip to the computer store.

Marc Phillips from APT Strategies says so called "open source" software downloaded for free or a small fee is starting to threaten Microsoft.

MARC PHILLIPS: Traditionally software's been sold on licence. Open source software tends once it's commercialised to be sold on a subscription basis, and therefore it becomes a lot more appealing and a lot more affordable. And that is a business model that you know, Sun and Google, I would suspect and predict, are certainly entertaining.

BRENDAN TREMBATH: Microsoft's Australian office has declined to comment on the challenge to its business by the Sun Google coalition.

Microsoft and Sun have clashed before. They spent three years in court over Microsoft using Sun's programming language Java.

APT Strategies Managing Director Marc Phillips.

MARC PHILLIPS: There's no doubt that Sun and Microsoft have always been sort of enemies of the desktop, and I think where Google plays a significant potential change is that Google's penetration globally is you know, half of the world use their search engines, and if Sun can leverage their distribution, you know, that could spell some trouble for Microsoft.

TANYA NOLAN: Marc Phillips is the Managing Director of APT Strategies. He was speaking there to our reporter, Brendan Trembath.