Ten years ago, Microsoft Corp. strongly considered discontinuing Office for the Mac. Apple Inc. had its own competing AppleWorks office software. But the move still would have dealt a crippling blow to Apple, whose recently returned leader Steve Jobs had yet to conjure up the original, chubby iMac that started Apple's turnaround.
Instead, Microsoft said it would prop up its struggling rival, investing $150 million and promising to keep releasing new versions of Office for the Mac.
Times change. Apple is in the midst of a nearly decade-long upswing. It now sells one of every seven laptops purchased by U.S. consumers.
But the sword of Damocles that is Office continues to hang over the Mac. Every closely watched delay in Office 2008 revives some fear among Mac fans about Microsoft's long-term commitment.
In an attempt to defuse that threat once and for all, Apple released a beefed-up iWork '08 this week.
Making the Numbers work
First launched in January 2005, iWork included just two components: a PowerPoint-like presentation maker called Keynote and a page layout/word processing application called Pages. Though Pages could display tables and columns, it could not open Excel spreadsheet files.
The lack of a spreadsheet, along with Office's general ubiquity, explain why iWork has made little headway against Office despite its $79 price -- about half that of the cheapest version of Office.
According to NPD Group Inc., iWork held just 16% of the Macintosh office software market as measured by copies sold in retail and e-commerce stores in the past 12 months in the U.S. Office held 84% of the Mac market. Moreover, revenue from Mac Office sales has grown at an average annual rate of 73% in each of the past five years.
"The fact of the matter is that most everyone that has been switching to the Mac has been buying Microsoft Office," said Chris Swenson, an NPD analyst.
But with its third version of iWork, Apple has belatedly rounded out the suite with a long-rumored spreadsheet app called Numbers.
With it, Apple hopes to finally catch up to Office on its home turf, while "creating an insurance policy" should Microsoft ever decide that hurting iMac sales by retiring Office would outweigh Office's booming Mac sales, Swenson said.
The updated suite also has its release timing -- the back-to-school season -- going for it. Office 2008 for the Mac, meanwhile, is now scheduled to be out next January, missing not only the back-to-school market but Christmas.
What works (for the right price)
Apple claims that iWorks '08 can also open and save all Microsoft Office documents, including the new XML-based ones created by Office 2007 and the future Office 2008.
Initial reports from Mac fans who bought iWork '08 on its first day say that Numbers, while not as powerful as Excel, should be sufficient for most users.
Finally, $79 looks attractive compared with Office 2004 standard edition's $399 list price ($239 for an upgrade).
But Swenson, himself a Mac user with both iWork and Office installed on his machine, remains skeptical.
Because of "zero enforcement" by Microsoft or its resellers, any consumer can easily buy Office's Student and Teacher edition without proof of academic affiliation, he said. With a full copy listing for $149, and $25 rebates available the whole summer, the price gap with iWork suddenly shrinks.
And while Microsoft is aggressively upselling consumers to pricier editions of Office 2007 by removing the popular Outlook e-mail application from the Home and Student edition, Swenson said there is no indication that Microsoft will follow a similar strategy by removing the Entourage e-mail app from the Home and Student version of Office 2008.
IWork '08 does not include an e-mail app, though Mac OS X comes with a Mail program.
"I think there are a lot of great features in iWork," Swenson said. But given the "rock-bottom pricing" of Office's student edition, he said, "I think many Mac users are going to stick with the Microsoft suite."
AppleWorks and FileMaker
Swenson does expect Numbers' introduction to accelerate the move of remaining AppleWorks loyalists over to iWork. AppleWorks does include a spreadsheet, as well as a rudimentary database program. It is still being sold, though it has not been updated since 2004.
Could Numbers also cannibalize sales of FileMaker, the popular, easy-to-use database still owned by Apple via a subsidiary?
Executives from FileMaker, which released an update last month that continues to target non-database administrators, did not return an e-mail request for comment.
Swenson says that with a claimed 10 million paying users, "FileMaker does pretty well; I think the impact is going to be limited."
But Tim Trimble, a Mukilteo, Wash.-based software consultant and author of FileMaker Pro Design & Scripting for Dummies (For Dummies, 2006), estimates that as many as a quarter of FileMaker users use the database in a simple enough way that a spreadsheet such as Numbers could easily accommodate them.
"A lot of the time, it's small businesses doing contact management stuff like tracking customers or sales," he said. "With that in mind, I do agree that it [Numbers] could cannibalize FileMaker sales."