What's Behind Apple's iWork?

Microsoft's Office still dominates the market, but Apple's new software may signal a tectonic shift in the two behemoths' uneasy alliance

by Arik Hesseldahl

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It's hard not to wonder if the relationship between Cupertino and Redmond isn't a bit more strained these days. But then again the two giants of the tech industry that reside in those locales have always had a rocky relationship.

Long Cold War-style rivals, Cupertino (Calif.)-based Apple (AAPL) and Redmond (Wash.)-based Microsoft (MSFT) fought a bitter campaign for the hearts and minds of personal computer users everywhere. Microsoft won more minds and wallets than did Apple, which won plenty of hearts, but not enough. Their struggle ended in a peace of sorts in 1997. Microsoft took a $150 million stake in Apple. Apple made Internet Explorer its default Web browser. And they settled a toxic patent dispute.

Making Another Run at Office?

At the time, Steve Jobs was just beginning his comeback as Apple's chief executive (he was called "interim" CEO). Key partnerships, he said, would go a long way toward restoring Apple to health, and none were more important than that with Microsoft. Saving Apple, he said, required getting beyond the insistence that for Apple to win Microsoft would have to lose. It was controversial but it was necessary.

And no application, from Microsoft, has been more important for the Mac's long-term survival than Microsoft Office. Ten years after that historic deal, Office for the Mac continues to be the best-selling piece of Mac software that doesn't come from Apple.

So it was a tad surprising that Apple announced on Aug. 7 a new version of its own office productivity software, dubbed iWork '08. Included in iWork, which will sell for $79, is a new application called Numbers, a spreadsheet application analogous to Microsoft Excel, but as with all things made for the Mac, Apple made it easier to use.

Previously, iWork had contained only Pages, a word-processing program comparable in many respects to Microsoft Word, and Keynote, a presentation program that is comparable to, but far better than PowerPoint. (Al Gore's infamous presentation that led to the film An Inconvenient Truth was created in Keynote, not PowerPoint, as many, including myself, have said.) Adding Numbers completed the circle.

The announcement from Apple also couldn't help but raise eyebrows in the wake of word from Craig Eisler, head of Microsoft's Mac Business Unit, on Aug. 2 that the software giant will delay the release of its next version of Office for the Mac until January, 2008. It was at least the second announced delay for that product. Apple's move in 2005 from using chips from IBM (IBM) and Freescale Semiconductor to using chips from Intel (INTC) apparently contributed to the delay, plus a shift in the file format that Microsoft uses for Office documents complicated the job of updating that program.

So, as of this week, Apple has its own office software suite that does more or less the same things, is compatible with Office, and sells for just a little more than half of Office's starting price of $149.

A Move Toward Google?

It's tempting to think that Microsoft may be in trouble on the Mac front. That's not the case yet, but it could be. The Microsoft Office brand is still, by far, the most powerful one when it comes to basic business software. Say what you will about all the many confusing versions of Office that Microsoft has put out for Windows, when you have a PC, you gotta have Office. And the same thing is true when you have a Mac.