Microsoft's launch Sunday of new online software is being widely seen as a desperate, defensive measure against Google, IBM, OpenOffice and other Web 2.0 challengers to its Office franchise. But the numbers show Office is stronger than ever -- what's really going on?

To recap, Microsoft over the weekend unveiled Office Live Workspace, Microsoft Exchange Online, SharePoint Online, and a host of other Web-based productivity and collaboration tools. The Live SaaS products are aimed at consumers while the Online offerings are meant for enterprise use.

To read some of the first takes by bloggers and MSM on these developments, you'd think Office 2007 -- unveiled in January by Microsoft -- has been such a bust that competitors now simply need to sit down at a table in Yalta and decide how best to divide the productivity software market between themselves.

"The barbarians are at the gate, but no one seems to be defending the castle," notes Michael Arrington, over at Tech Crunch, of Microsoft's efforts to guard its core desktop franchise.

Peter Kafka, at Silicon Alley Insider, says the introduction of the Online and Live products should be seen in the following light: "Microsoft finally responds to Google's challenge"

At the same site, disgraced Wall Street analyst Henry Blodget warns that Google "is about to launch its PowerPoint killer." I wonder if Blodget has secret notes in his desk that reveal what he really thinks about Google Apps.

Writing about Monday's news, Joseph Menn, at the Los Angeles Times, says breathlessly that Microsoft "has seldom dealt with opponents as strong as those it now faces" in the office software market.

"The threat posed by Google Inc. and others distributing cheap or free alternatives to some of Microsoft's bread-and-butter products has shaken the Redmond, Wash.-based company like nothing since the Internet explosion a dozen years ago," writes Menn.

There are a couple of problems with these and similarly alarmist reports published today about the state of Microsoft's Office franchise.

The biggest is that they assume Microsoft has never before faced down a challenge to a cornerstone franchise from a deep-pocketed competitor. They don't recall that IBM for years tried, and failed, to unseat Microsoft at the operating system level with its own OS. (Hands up if you're reading this on an OS/2-based computer.)

IBM eventually gave up and is now using the open source camp to wage a proxy war against Windows and Office. Hence its latest effort to boost OpenOffice use by introducing Lotus Symphony, which is based on the open source software.

The other problem with Office-is-now-doomed arguments is the inconvenient fact that free, or low-cost, productivity software is hardly new. The very first PC I purchased (an Intel-based Wang 386 SX, back in 1993) came pre-loaded with free office software--from Microsoft! That, of course, was Microsoft Works.

The latest version of that program, Works 9.0, can be had today for $36.00 on Amazon.com. And, like Google Apps, it offers a word processor, a calendar and a spreadsheet. It's not free (unless you buy a new PC), but it can be used offline.

Meanwhile, Sun has been offering StarOffice for free for almost eight years -- during which Microsoft's Office franchise has done nothing but grow.

Now, let's go to the numbers.

Office 2007 -- launched amid this so-called frontal assault by Google and others -- has actually outperformed Office XP in terms of boosting Microsoft's sales growth in the productivity software market -- even though Google Apps didn't exist when Office XP hit shelves in 2003.

During the first full reporting period of Office XP availability -- the second fiscal quarter of 2004 -- Microsoft's Business Division, which derives most of its revenue from Office (it was called the Information Worker unit back in 2004) posted year-over-year sales growth of 18%. By contrast, the Business Division posted sales growth of 19% during Office 2007's first full quarter of availability -- 4Q of fiscal 2007.

So, do Microsoft's announcements this weekend really represent a desperate, defensive move against Google, IBM, and others?

Not really. Microsoft, like everyone else, simply realizes that the Web is becoming the most effective medium for distributing and using software -- and so it needs to move its products there. Were the company to stand still on this, it surely would be by-passed by OpenOffice, Google, and any 12-year-old kid who can write a basic word processing program and post it online.

But that's a no-brainer. It's about as profound an observation as noting that a television manufacturer would have lost market share had it not introduced a color model in the late 1960s. The whole market was headed that way.

The biggest risk Microsoft faces to its Office franchise during this industry-wide transition to the Web is not from Google or anyone else. It's from its own apparent inability to give consumers and business users an elegant, easy-to-navigate bridge from desktop to Webtop.

One analyst recently told me that he thinks the Windows Live initiative is a confused mess. I'm not sure these latest add ons -- under the dual Live and Online strategies (aren't our work lives and home lives supposed to be converging, technologically speaking?) -- really help.

But Microsoft still has a lot of time to get this right, and if it does Google and the rest will continue as niche players only in the office software market, which remains Microsoft's to lose.