Google (GOOG) is trying to diversity beyond the search business. One of its most important attempts is to offer low cost applications for PCs. Its Google Apps includes e-mail, calendar, word processing, and presentation functions. The price for the Apps product is $50. Its target is the business user based of Microsoft (MSFT) Windows.

While Google is trying to get business for a competitor that changes a high rate for its PC software, IBM (IBM) is about to attack it with a lower-priced product that could severely damage the search company’s initiative.

IBM’s new LotusLive iNotes will offer e-mail and other critical productivity tools. The price will be a modest $36 a year per users. “This is trouble for Google,” Gartner Inc. analyst Matthew Cain told the AP.

Google’s “pitch” to the investment community is that it can build a business beyond search advertising. So far it has not been very convincing. Some of its major services like YouTube, its Checkout e-commerce system, and Google Earth bring in almost no revenue. Some analysts believe that YouTube loses as much as $300 million a year. Apps is an essential part of Google’s case that it can find new and large enterprises to diversity its sales.

IBM has some important advantages over Google. Big Blue has relationship with many major companies around the world. It provides them with hardware, enterprise software and IT consulting.  IBM’s revenue last year was $103 billion, and it has sales forces and tech support in almost every country .

Google has none of that.

Douglas A. McIntyre

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