Mathew Ingram: Google and Sun a very real threat

The news release that went out last Monday was short and relatively straightforward, but it triggered a tidal wave of speculation that spread throughout the internet, from the world of blogs all the way to mainstream media. It said online search leader and stock market darling Google would be holding a press conference with Sun Microsystems, maker of corporate servers, and developer of the Java programming language. And both Sun chief executive Scott McNealy and Google CEO Eric Schmidt were going to be there.

What could the two have to announce? Most tech pundits quickly came to the same conclusion: it had to be something that played off the strengths of both companies, and it had to be significant enough to hold a news conference - unusual for Google, which tends to release new products whenever it feels like it, with little fanfare. The number one theory was that they were going to announce a web-enabled office software suite, which would be powered by Sun's StarOffice and would allow anyone to create and edit documents with just a web browser.

This "Google Office", the thinking went, would be the perfect competitor for Microsoft's Office suite, which has about 90 per cent of the global desktop software market of programs such as word processors and spreadsheets.

The idea of a Google-powered, web-based office suite became so prevalent in advance of the news conference that Microsoft's share price actually dropped by several percentage points, wiping billions of dollars from the software giant's market value.

Compared with that kind of build-up, it's not surprising the actual announcement from Sun and Google was a tad underwhelming. After congratulating each other, and talking about Schmidt's past history with Sun - where he worked on the development of Java and eventually became chief technology officer - it turned out that all the two sides had to announce was that Sun would be giving users who downloaded its Java run-time engine the opportunity to download Google's browser toolbar as well. In other words, a fairly typical bundling arrangement.

The reaction from the tech crowd was swift, and not very complimentary. "A cheap publicity ploy," one commentator called it, while another outlet said Sun - a former tech leader that has seen its fortunes slide over the past few years - had taken advantage of the relationship between Schmidt and McNealy to get a "much-needed sprinkling of Google stardust". Forrester Research analyst John Rymer said the news was "less than we all hoped for".

The search company said during the news conference that it would help Sun popularise and distribute its StarOffice suite, but Schmidt was short on specifics.

Despite the lacklustre tone of the announcement, there are those who believe Google and Sun are planning something far more elaborate than just a bundling deal for the Google toolbar. "Sun and Google have set the stage for something that is developing over time," predicted IDC analyst Jean Bozman.

Wishful thinking? Perhaps not. After all, the search company has been slowly but surely increasing its reach over the past couple of years: in addition to search, it now offers a free email service that competes with Microsoft's Hotmail; a free instant-messaging and voice-over-internet tool that competes with MSN Messenger; a photo service and a satellite photo and mapping service that competes with one from Microsoft.

Not only that, but observers say some of Google's recent hires are a sign that there is more going on than just a bundling deal. One of the new additions was Joerg Heilig, a former senior software engineer at Sun who was in charge of StarOffice. The company has also hired legendary software developer Rob Pike, who helped create the original Unix operating system, the foundation for both Sun's Solaris and the open-source OS Linux. Google also recently hired internet guru Vint Cerf, who helped develop the TCP/IP protocol and thereby made the internet itself possible.

Supporters of the Sun-Google idea note the two companies also share a philosophy. While at Sun, Schmidt was a firm believer in the company's motto "the network is the computer." His own motto was "don't bet against bandwidth". Powered by one of the largest distributed computing platforms in the world - an estimated 100,000 servers - Google has what it takes to host the kinds of networked applications that Sun has always dreamed of. That might not involve a full-fledged competitor for Microsoft's Office, but it could easily support a free web service that would come darn close.

And what would that mean for Microsoft? Obviously, the giant software company isn't going to shrivel up and blow away any time soon. Not only does it have US$35 billion ($50 billion) or so with which to finance a competitive response to Google, but it has thousands of large corporate customers who are unlikely to dump Office just because Google decides it can offer something similar over the internet.

What that kind of competition could mean, however, is slower growth - and that is a very real threat. Is it a sure thing? Not at all. But the idea alone is enough to keep Microsoft's senior executives awake at night.