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Live Documents To Break Microsoft…We'll See

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New product press releases unencumbered by the complexities of releasing actual software set off alarm bells. And when those press releases are so boastful as to suggest that the (unlaunched) product can hurt a competitor’s $20 billion revenue stream, the alarm bells get much louder.

So with alarm bells screaming, Hotmail co-founder Sabeer Bhatia announces he’s going to war with Microsoft by (someday) launching an online version of Office. The fact that Bhatia got rich when Microsoft bought Hotmail for $400 million in 1997 only adds additional drama to the story.

The as yet unlaunched product, called Live Documents (see our review from a year ago when the product was significantly different), will be a Flash based online suite that competes with Word, Excel and Powerpoint. The company will also release plugins that work with the desktop Office software that lets users store and collaborate on documents online.

If this sounds a bit like Google Docs and Zoho, that’s because it is. The differentiating factors for Live Documents, besides the fact that it’s built on Flash (Google Docs and Zoho are Ajax applications), is that they are promising feature matches with Office 2007 and they have the offline plugin component.

It’s not clear that Flash is a better (or worse) interface than Javascript, but it isn’t much of a competitive advantage either way. And we note that Zoho has their own plugins for the desktop Office. Zoho also has an offline version of their product via Google Gears; its likely that Google is not far behind.

CTO Sumanth Raghavendra says Live Documents “break’s Microsoft’s proprietary format lock-in.” But in reality Live Documents has absolutely nothing new to offer users based on what we’ve been told so far. And as Dan Farber notes, they aren’t yet releasing the product and don’t even have screen shots to share with us.

There are additional red flags as well. As Zoho’s Sridhar Vembu notes, Bhatia is making a big mistake by estimating Live Documents revenue based on taking market share from Microsoft. Bhatia says “If Live Documents makes 1 per cent of Microsoft Office revenues, then we would earn USD 200 million a year. If Live Documents makes 10 per cent of Microsoft Office revenues then our revenues would be USD 2 billion a year in the next three to four years.” Vembu notes Guy Kawasaki and others who’ve warned against this kind of analysis.

So far Live Documents is nothing more than bullshit and smokescreens. That may have been the way to do business when Bhatia co-founded Hotmail in 1996, but his software is going to have to survive on its own in a hyper competitive marketplace when it actually launches. Hubris alone won’t do it. We’ll see if he can pull off a second win, or if Bhatia is, in the end, just another one trick pony. So far, I’m underwhelmed.

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