Sun's StarOffice launch angers Microsoft
Sun is turning-up the heat on Microsoft with the imminent launch of its latest version of StarOffice.
The StarOffice 6.0 suite, which until recently was free, is being touted as the low cost alternative to Microsoft's Office.
The product, which contains word processing, spreadsheets, presentation and database applications, will be officially launched on 21 May.
The packaging on the retail version says: "Sure, you can pay hundreds of dollars for an office productivity suite. But why?" - a statement which has enraged Microsoft.
Microsoft has hit back, warning there are hidden costs to the software, which will retail for £52.99.
MSFT should be angry. Every $100 million in revenues from Star Office for Sun means a revenue loss of $500 to $800 million for MSFT. And MSFT gets $10 billion (out of a total of $28 billion) in revenues from desktop applications which is chiefly Office. This is MSFT's most profitable division accounting for about 45% of profits (some estimates are as high as 50%). If Sun gets $200 to $300 million in sales, it will decrease MSFT's profits by about 8% (approx. mental calculation). If MSFT's PE remains the same, that will result in a $24 billion loss in market cap (oddly, Sun's market cap today is $23.67 billion). MSFT will do everything in its power to kill Star Office and Sun.
This analysis does not take into account the increased viabilty of Linux now that there is a fairly good Office application. This is a direct threat to MSFT's OS division which is MSFT's second most profitable. However, it is difficult to quantify the effect here. My guess is that it could be as large as 40% of the Star Office effect (or a loss of $600 million in revenue per year). This is a SWAG and I do not want to spend the rest of my life defending this number.
Bottom line: The total threat from Star Office to MSFT is around 10% of profits in a year or two, in my estimation. Feel free to post your estimates.
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