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A challenge to Microsoft? Not this deal

Google Inc., the world's leading Internet search service, yesterday struck up an alliance with computer hardware and software maker Sun Microsystems Inc. that could strengthen both companies' bids to play leading roles in the future of online services. But the deal fell short of the blunt challenge to the power of Microsoft Corp. that had been expected by many industry watchers.

''Both companies are devoted to software as a service and the network as the computer," said Sun chief executive Scott McNealy.

But neither McNealy nor Google chief and former Sun executive Eric Schmidt revealed many details about the new relationship. They described just one specific agreement -- a deal to bundle Google's popular browser toolbar with Sun's Java software system. Computers that use Java automatically download updated software over the Internet. McNealy said about 20 million people download Java software every month. Putting Google Toolbars inside their browsers could lead to a major increase in Google's user base, and a boost to the company's already vast Net advertising revenues.

It also means more revenue for Sun. John Loiacono, Sun's executive vice president for software, said Google will pay a fee to Sun for each download of its toolbar. But Loiacono would not reveal the amount of money involved. McNealy also said that as part of the deal, Google would buy powerful server computers from Sun to run its worldwide Internet operations.

''There's going to be a lot of money flowing both ways if we do this thing right," McNealy said.

But software industry specialists had thought that Google might agree to distribute Sun's OpenOffice, a free office productivity program that competes against Microsoft Corp.'s industry-leading Office suite of word-processing, spreadsheet, and presentation software. OpenOffice has yet to make major inroads into the office suite market.

But Schmidt said Google is used by 80 million people every month. An accord to distribute OpenOffice on the Google site could quickly make it a significant rival to Microsoft Office. Google could offer easy downloading of the OpenOffice suite, or it could deliver the product as a ''Web service" -- a system that would let users create text documents and spreadsheets inside their browsers, without having to install OpenOffice onto their computers.

McNealy and Google said the two companies would seek to expand the use of OpenOffice. But both men refused to describe how they would do this. Asked whether Google would offer OpenOffice as a Web service, Schmidt said ''we're not announcing anything along those lines." Nor would he discuss the possibility of Google distributing the software as a download.

McNealy was once known for his caustic attacks on Microsoft. But last year, Sun reached a partnership with the longtime rival, to make its products work better with computers using Microsoft's Windows operating system. Yesterday McNealy was careful not to depict the Sun-Google deal as a challenge to Microsoft. Asked whether he and Schmidt were picking a fight with Microsoft, McNealy replied: ''We're going after revenue, profits, customers, ease of use."

The deal came as a disappointment to John Rymer, industry analyst at Forrester Research in Cambridge.

''It was less than we all hoped for," Rymer said. He doubted that the Google Toolbar deal alone would bring much new revenue to Sun or many more users to Google. Indeed, Rymer thinks that Google and Sun had hoped to detail more substantial initiatives, but couldn't put the deals together quickly enough.

''What I think is they failed to come to an agreement on some of the other things they were working on," said Rymer. ''That's why it was so quixotic today."

On the other hand, the deal confirms that Sun and Google have joined forces. Rymer said that's especially valuable for Sun, which has never fully regained the prominence it had during the Internet boom of the 1990s.

''Just by virtue of the fact that Sun's name was associated with Google," he said, ''their stock went up 6 1/2 percent" on Monday.

Yesterday, Sun stock closed up a penny at $4.20, while Google shares fell $7.68 to $311, both on the Nasdaq Stock Market.

Hiawatha Bray can be reached at bray@globe.com.

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