Microsoft In $3 Billion Cloud Deal With HP-EDS

In a sign that cloud computing isn't just pie in the sky, Microsoft said Monday that it has signed an agreement to deliver cloud computing services through Hewlett-Packard's EDS outsourcing unit under an arrangement that could generate more than $3 billion in revenue for the companies.

Under the plan, EDS will act as a primary reseller for Microsoft's Business Productivity Online Suite, which includes Internet versions of Exchange, Office, SharePoint, and Live Meeting. EDS will integrate the products into its Workplace Services portfolio, and will offer complementary consulting, implementation, and integration services.

Microsoft also said it would slash the price of its Business Productivity Online Suite by 25% for customers who purchase the package by June 30.

"Based on the increasing demand and enthusiasm we're seeing, it's clear that partners are recognizing the opportunity and that this is the right time to embrace Microsoft's software-plus-services approach," Ron Markezich, corporate VP for Microsoft Online, said in a statement.

Also Monday, Microsoft said it secured cloud services deals with industry partners Accenture and Avanade. Both companies will launch services designed to help businesses migrate their applications from a desktop environment to a hosted architecture.

Microsoft needs to push harder into cloud, or hosted, services if it's to protect its flank from online competitors such as Google. Google's low-cost, Web-based Google Apps suite, which includes word processing, presentation, and spreadsheet programs, threatens to cut into Microsoft's lucrative Office franchise as an increasing number of businesses and consumers turn to the Web for their computing needs.

Sales of Microsoft Office to consumers fell 30% year over year in the most recent quarter, while business sales increased just 2%. Sales of Microsoft Windows dropped 16% during the period. Microsoft shares were off 2.48%, to $19.90, in early trading Tuesday.

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