Google-Sun alliance hints at future deals

Analysis
By Jorn Madslien
BBC News business reporter

The fresh alliance between Google and Sun Microsystems is seen in some quarters as perhaps the toughest threat yet to Microsoft's dominance as the world's leader in the personal computer software market.

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Under the agreement, Sun is being paid an undisclosed sum to add Google's browser toolbar to its Java software. Sun will also buy Google advertising space.

Google, in return, has vowed to "explore opportunities to promote and enhance" the Sun-backed open-source software OpenOffice and Sun's Java software, as well as buying some Sun hardware and software.

"Working with Google will make our technologies available more broadly, increase options for users, lower barriers and expand participation worldwide," said Sun chief Scott McNealy.

At least, that is what he hopes.

But there are plenty of sceptics who feel that Google and Sun's lofty aspirations are just that: aspirations.

Hypothetical benefits

Tuesday's announcement fell far short of offering a real alternative to Office, which accounts for more than 40% of Microsoft's operating profit - mainly because Google failed to go the whole way and offer OpenOffice as an internet service or as a download for the 80 million people who use Google each month.

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"OpenOffice is already an alternative, but if Google gets involved in supporting it, that could be the thing that puts it over the top," says John Rymer, analyst with Forrester Research.

So far, this possibility remains purely hypothetical.

Critics observe that Google's chief executive Eric Schmidt was notably keen to stress that Tuesday's agreement did not involve such cooperation with Sun.

Publicity stunt

So whereas there are plenty of reasons why investors should be excited, if not by the alliance itself than at least by its potential, and whereas nobody doubts Google's ability to pose a serious challenge to Microsoft, its commitment to do so remains in doubt.

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In fact, even Sun's preparedness to go head-to-head with Microsoft is being questioned. After all, Sun and Microsoft are themselves locked in a separate alliance that, amongst other things, aims to ensure Sun computers work well when running Office.

Some even see Tuesday's announcement as little more than a publicity stunt.

There are acidic suggestions that Mr Schmidt agreed to pose alongside Mr McNealy as a gesture of goodwill inspired by a sense of loyalty to a former boss. (Mr Schmidt worked for Sun for 14 years).

"I think Eric is doing this as a personal favour for Scott," says industry analyst Rob Enderle. "It provides a certain amount of press and visibility to Sun when there hasn't been very many positive things going on at the company."

Further initiatives

Yet it would be churlish to dismiss the partnership outright.

Mr Schmidt did say he was looking forward to "exploring other related areas of collaboration", and Mr McNealy said "we expect more".

There is no shortage of possible avenues such collaboration can take.

One promising route forward could see Google integrate Java into its existing email, instant messaging and telephony services.

This would enable Sun to distribute Microsoft-independent content to Google's users, making its arch-rival redundant for many computer users.

Google might also seek to integrate Sun software with its Gmail offering, with a view to challenging Microsoft's Outlook.

Google's Gmail currently lacks a calendar function, and some believe the firm would like to add one - albeit perhaps a limited version that could serve home users well without meeting the requirements of corporate users, thus avoiding a head-on challenge to Microsoft's business model.

For the time being none of these routes are being talked about in public, and there are no reasons why Microsoft should worry as yet.

There is little doubt, however, that the software giant is warily waiting for Google and Sun's next move.