Microsoft Unveils Office 365 Preview -- Just Wait for Windows 8

Microsoft Corp. (NASDAQ: MSFT) today announced the release of its official preview version of Windows Office 365. Like competitor Google Inc. (NASDAQ: GOOG) with Google Apps, Office 365 is cloud- and subscriber-based. Microsoft CEO Steve Ballmer said:

The new, modern Office will deliver unparalleled productivity and flexibility for both consumers and business customers. It is a cloud service and will fully light-up when paired with Windows 8.

It had better be ‘unparalleled” because Microsoft can’t afford to let Google — or any other pretender — erode its most profitable division. For the first nine months of the current fiscal year, the Microsoft Office division generated more than half the entire company’s operating profit.

Google has competed hard for corporate accounts, and has won between a third and a half of all new corporate customers that are moving to Web-based apps. Microsoft lowered the price of its Office 365 suite from $120/user to $96 earlier this year, and the company has undercut Google’s $50/user price by $2 for small companies.

Shed no tears for Microsoft though. The behemoth still owns more than 90% of the business productivity software market. Google and others won’t be a big threat for a long time yet, but Microsoft will do all it can to hold onto its share and its profits. Particularly because the Redmond giant has failed to dent Google’s search dominance and is so far behind in the mobile market that it is unlikely ever to be a real threat there.

Paul Ausick