At the end of August, Sun Microsystems announced that it had acquired Star Division Corporation, makers of StarOffice 5.1 office productivity software (http://www.sun.com/staroffice/). Following its acquisition of Star Division, Sun announced plans to publish the StarOffice APIs and to distribute the software for free over the Internet. The StarOffice 5.1 suite includes word processor, database, spreadsheet, graphics, presentation, HTML editor, mail and news reader, scheduler, and browser software. StarOffice is a largely Microsoft Office-compatible clone office suite (available in eight languages) that has sold well in Germany, but hasn't made a significant impact outside of Europe. Sun's announcement might represent the first serious challenge in some time to Microsoft Office, which has been the number one selling office software package for several years. According to some estimates, Microsoft derives about 40 percent of its $20 billion in annual revenue from Office, with about 100 million current worldwide users. Sun hopes that by distributing its StarOffice software over the Internet, the company will entice businesses to buy Sun servers. A Java version of the StarOffice software requires a server to store the files the system creates. This approach is perfect for Sun's X-based network computer, and provides a potential competitor to Microsoft Windows applications running on Windows NT Server 4.0, Terminal Server Edition and Citrix. Sun also hopes to create a business providing technical support and training using StarOffice, according to Marko Boerries, former Star Division CEO and now Sun vice president. "People will need and want our services," he said. "To get that, you can buy subscriptions from us, and we will continually update and support you." Not only has Sun made plans to distribute StarOffice over the Internet, the company hopes to establish an application hosted service around StarOffice that Sun will call StarPortal. Sun will seek to get wide distribution of StarOffice through various means and will initiate several deals with ISPs and online services to promote this software. Analysts have concluded that several markets (e.g., education) will find this model of free office productivity software running on potentially low cost network computers appealing. For Sun, the main play is to enhance the sales of its more powerful server systems, and this move certainly has the promise to do that. Sun has long held a competitive stance to Microsoft. Now that Sun has acquired the StarOffice software, the company has a respectable office suite that runs on Windows 9x, NT, Solaris, Linux, and even OS/2. On Linux, StarOffice is one of the major applications currently available. Sun will argue that its office software is free and is good (and it is), so why spend $500 to $800 on Microsoft Office? It's the same argument Microsoft applied to Netscape's browser when Microsoft shipped Internet Explorer (IE). It seems odd at first glance, but Sun's move to acquire a key Linux product could boost Linux at the expense of Sun's Solaris OS. Sun's move gives the company a desktop presence and conjures up some interesting possibilities. Sun might use StarOffice as a platform in the handheld Personal Digital Assistant (PDA) marketplace, for which an office productivity standard has not yet emerged. The free StarOffice software with Sun as its deep pocket backer could also conceivably be the death knell to Corel Office and WordPerfect. Likewise, Sun's plans for StarOffice could seriously effect Lotus SmartSuite. (Before IBM acquired Lotus, it considered buying Star Division.) Under market pressure from Sun, Microsoft may finally have to cut the price of Office. Certainly, large corporations can use this free product as a bargaining chip—that is, if they aren't yet heavily invested in the Windows platform. Once broadband access is more prevalent, Sun's model will become even more appealing.