Sun's move to 'change the rules'
Sun Microsystems is again preparing an ambitious attempt to overturn the status quo of the personal-computer industry, this time by unleashing a Web-based assault on the word-processing and spreadsheet applications now dominated by Microsoft.
Tuesday, Sun formally announced its acquisition of Star Division, which makes a suite of office software known as StarOffice that includes a word processor, a spreadsheet program, presentation software and email and calendar programs. StarOffice, in fact, is highly similar to Microsoft's Office suite, right down to its ability to read and write data in the same Microsoft file formats. Sun, however, insists it has no interest in competing directly with Microsoft's PC applications. Instead, Sun plans to turn StarOffice into a free Internet-based service -- one that can be run directly by any user with any Web browser without the need to load increasingly large programs directly onto the PC.
Email and calendar applications have already begun migrating to the Web, where portal sites such as Yahoo! offer them as free services to attract users. Should Sun's move spark a similar stampede toward free, Web-based office applications, it could pose a major problem for Microsoft, which is believed to derive roughly 40 percent of its revenue from sales of Office.
But Sun officials, who rarely miss an opportunity to take a jab at the giant software company, insist that beating Microsoft is almost beside the point. "This is not something where we sat around all day and said, 'How can we pick a fight with Microsoft?' " said Ed Zander, Sun's president. "This is about us changing the rules of the game." In particular, Mr Zander and other Sun officials argue that the Star Division acquisition is simply their latest attempt to push the computer industry away from the PC-centric model pioneered by Microsoft and Intel and toward one built around serving up software services over fast, powerful networks. Sun stands to benefit greatly from such a shift, which would allow it to sell more of the beefy computer servers that handle Internet traffic.
Sun's new software strategy faces several challenges. While growing in popularity, Web-based email and calendar software is still crude and often slow, particularly for home users who must access it over dial-up connections. For instance, using the Web version of StarOffice, dubbed StarPortal, requires users first to download an "applet" written in Sun's Java language, a task that takes more than a minute using an ordinary 56-kilobit modem.
Then there is the fact that in choosing to take on Microsoft's flagship product, Sun risks repeating a history of disasters at several other companies, including Novell and the former Borland International. Early rumours of Sun's Star Division acquisition, in fact, sparked derision in Silicon Valley, with some comparing Sun Chairman Scott McNealy to a long line of failed chief executives who became obsessed with beating Microsoft. Mr McNealy, who often disparages Microsoft, insisted in an interview that "Sun has never done anything to beat Microsoft, only to win over customers".
Andrew Dixon, a Microsoft group product manager for Office, said Sun's move would have "no effect" on Microsoft's product development or marketing strategy. "We think customers will continue to choose Microsoft Office as their desktop product of choice," he said.
Some analysts, however, argue that the time is right for a company such as Sun to strike. "You're dealing with a Microsoft installed base of users that are relatively dissatisfied," said Rob Enderle, an analyst with Giga Information Group. In a recent survey of information-technology managers, in fact, Giga found that 75 percent said they would switch to a Microsoft Office competitor, if only one was available. Others said that Microsoft's installed base of nearly 100 million users and its giant research and development budget will allow it to prevail. Michael Kwatinetz, an analyst with Credit Suisse First Boston, suggests that it would cost companies far more to retrain their existing Office users on StarOffice than they would save by using the competitive software.
Sun figures the Internet gives it a powerful trump card. In addition to launching StarPortal, due in a "pre-release" form in October, Sun also will allow corporate users to use or redistribute the existing desktop version of StarOffice for free. Individuals can already download it at no charge, although it would take many hours at typical dial-up speeds. What's more, Sun also will distribute the underlying program source code for both StarOffice and StarPortal, giving companies and users the opportunity to modify the program or to incorporate pieces of it in their own products and services.
A number of Internet portals and service providers have already expressed interest in the Sun effort. In particular, so-called application service providers, which "host" software services such as email and messaging for businesses, said the StarPortal software could be very attractive to their customer base. "This is the way customers in our world want to buy software, by subscribing and getting it over the Web," said Gary Steele, chief executive of Portera Systems, which provides Web-based application services to business.
Portera is looking at using StarPortal on its business portal, as well as integrating some of its functions into other services. Kathleen Earley, president of AT&T's Internet-services division, said AT&T also will offer StarPortal on its network and will look into building new Web-hosting services based on the program.
Jonathan Mills, UK software product manager for Sun confirmed that the backbone of the offer would indeed be the portal offering:
"We are not setting ourselves up to fail in the Office space against Microsoft, in the same manner as Lotus/Corel. What we are talking about here is portal computing."
Mills said users could use the portal to allow all office-type files to be maintained and managed by their personal ISP. He said the response from OEM PC manufacturers, ISPs, and consumers wanting a free office suite had been "huge".
StarOffice is however also available as a free download for native use or for sale on CD for $9.99 for customers who understand that such a lengthy download would ultimately cost more, and take longer than snailmail.
Star Office 5.1 closely mirrors MS Office X and includes:
Writer, a word processor
Calc, a spreadsheet
Impress, for presentations
Draw and Image, for graphical manipulation
Schedule for calendaring
Base, a database
Discussion, an Internet news reader
Math, for formula conversions.
Dave Wilby contributed to this report.