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Microsoft Hopes Office Subscription Plan Will Counter Free Software

Microsoft is counting on Equipt's convenience factor to help it fend off threats from Google, IBM, and others that are offering free desktop productivity suites.
With its Office franchise under attack from a host of competitors offering free software, Microsoft is hoping that a new subscription pricing model for its cornerstone desktop franchise will encourage consumers to continue upgrading to the latest editions of the product.

Microsoft said Wednesday that it will give consumers the option of buying an annual license for Office and its Windows Live OneCare security package for $69.99 per year under a program called Equipt. The license covers use of the software on up to three computers and includes access to all future product upgrades.

Equipt will be available exclusively through Circuit City beginning in mid-July.

More than anything else, Microsoft is counting on Equipt's convenience factor to help it fend off competitive threats from Google, IBM, and other vendors that are offering free and open source desktop productivity suites that can be downloaded over the Internet and provide capabilities similar to Office.

"Consumers expressed frustration at having to spend time and effort installing different types of software, keeping current on new versions, and getting their computers set up. We're just making it really convenient and painless for consumers to get up and running in a few mouse-clicks," Microsoft group product manager Bryson Gordon said in an interview posted on the company's Web site.

Equipt includes the Office applications Word, Excel, and PowerPoint, as well as OneCare, Messenger, and Photo Gallery, plus other applications and services.

Microsoft is hoping that's enough to prevent consumers from migrating to free software. Google recently introduced its Google Docs package, which features functional equivalents of Office's main applications and costs nothing.

Meanwhile, IBM is offering Lotus Symphony, another free desktop productivity pack that's based on the open source OpenOffice.org project.

The emergence of free software could be hurting Microsoft's bottom line. The company said that sales of its Office products among consumers dropped 39% in the most recent quarter. The company blamed most of the decline on the fact that the previous year's third-quarter results were significantly boosted by revenue that had been deferred under an Office 2007 upgrade program.

Still, consumer sales of Office have shown no growth over the past three quarters, Microsoft said. The problem: Microsoft's Office revenue typically jumps when a new version is introduced, then quickly tapers off.

With Equipt, Microsoft is hoping to extend the consistent revenue stream provided by commercial Office licensees to the consumer market, and it's hoping that everyday computer users will see enough value in the offering to forgo free software.

"We found from our research that when you bring these categories together and keep them automatically updated, a subscription model makes a lot of sense," said Gordon.

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