Thus far, Microsoft Corporation (NASDAQ:MSFT) has mostly downplayed the disruptive threat that Google Inc (NASDAQ:GOOG) Apps represents for its lucrative Office business. To be clear, Office is Microsoft’s biggest cash cow, followed by Windows and servers. The business segment easily generated the most operating income last quarter at $4.1 billion.
You’d think Microsoft Corporation (NASDAQ:MSFT) would take any threat to that business pretty seriously, but the company just doesn’t see Google Inc (NASDAQ:GOOG) as a major contender. Microsoft Corporation (NASDAQ:MSFT) business division exec Julia White told The New York Times late last year that Google hasn’t “yet shown they are truly serious,” saying they’re still just an “advertising company.” That may just be a public facade though, as Microsoft Corporation (NASDAQ:MSFT) has reportedly set up a “Google Compete” team specifically to defend Office.
Either way, Google Inc (NASDAQ:GOOG) just got serious.
Thinking inside the box
As further proof that Hewlett-Packard Company (NYSE:HPQ) is sick of Wintel, the PC giant has just partnered with Big G to launch a new productivity offering geared toward small and medium businesses, or SMB. The package is called HP SMB IT in a Box, and HP is positioning it as a “one-stop shop” targeting the SMB segment.
Hewlett-Packard Company (NYSE:HPQ) SMB IT in a Box will notably include Google Inc (NASDAQ:GOOG) Apps for Business as a cloud-based productivity suite instead of Office, which promises to generate cost savings. Over 5 million businesses are now tapping the search giant’s cheaper alternative. HP will provide the requisite hardware, including PCs and printers.
Hewlett-Packard Company (NYSE:HPQ) remains the No. 1 PC vendor in the world, grabbing 15.7% of the market in the first quarter, and is expecting a boost in sales next year when Microsoft Corporation (NASDAQ:MSFT) stops supporting Windows XP. HP is a big partner to score for the Google Inc (NASDAQ:GOOG) Apps Reseller program.
Don’t fear Apple Inc. (NASDAQ:AAPL)
Even Apple Inc. (NASDAQ:AAPL) is getting into cloud-based productivity software, recently announcing iWork for iCloud at WWDC this week. During the demonstration, Apple kept pointing out that everything was taking place in a browser. The Mac maker made sure to point out that the new offering, which will launch in beta this fall, will support all of Office’s common formats.
Microsoft Corporation (NASDAQ:MSFT) doesn’t need to worry as much about Apple here, though, since Apple Inc. (NASDAQ:AAPL) almost never targets the enterprise directly. Apple has always gone after the mainstream consumer, and much of its recent enterprise momentum is thanks to the BYOD movement. Likewise, iWork for iCloud appears positioned toward meeting consumer productivity needs.
iWork for iCloud is also well behind Google Inc (NASDAQ:GOOG) Apps and Office 365 in terms of features, and it hasn’t even hit the market yet. It won’t be a big player in the enterprise.
The news is the latest in a string of collaborations between HP and Google. So far this year, HP has launched its first Chromebook, first Android tablet, and announced an Android laptop. After hedging its bets with those devices, HP is further diversifying away from Microsoft as part of its new multiplatform strategy.
The SMB segment is ripe for Google to target, as those businesses tend to be more price sensitive than companies in the Fortune 500. As Google continues to build up Google Apps, investors can expect the company to move up-market later on. Watch out, Microsoft.
The article Google Gets a Key Partner in Challenging Microsoft Office originally appeared on Fool.com and is written by Evan Niu, CFA.
Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.
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