Microsoft to sell Web-based programs through HP

Microsoft Corp. will sell its Web- based e-mail and business software through Hewlett-Packard Co.'s Electronic Data Services unit, an agreement that will generate $3 billion in sales over five years.

The revenue will be shared between the two companies, Microsoft Vice President Ron Markezich said, without giving the exact terms. There's particular interest in Web versions of Microsoft's Exchange and SharePoint programs among users of International Business Machines Corp.'s software, EDS said.

The agreement makes EDS the first reseller of the programs to large companies. Microsoft, the world's biggest software maker, developed the programs as Internet-based alternatives to its applications -- a bid to ward off competition from companies such as Google Inc. and IBM. Online programs can be cheaper and easier to manage because they're updated automatically and don't have to be stored on customers' computers.

Microsoft, based in Redmond, Washington, says it has used the programs to win customers such as GlaxoSmithKline Plc and Eddie Bauer Inc. away from IBM's Lotus Notes and Domino software. Eighty-two percent of Microsoft's Web-based software users switched from rivals, mainly IBM, Markezich said. The Microsoft programs also include software for teleconferencing and instant messaging.

IBM has its own Web-based versions of business programs, called LotusLive. "We've seen an excellent response from customers," said James Sciales, a spokesman for the Armonk, New York-based company.

If EDS shows a preference for Microsoft over IBM, it hurts their ability to offer information-technology services, he said. "It's unfortunate for customers that EDS now seems to be losing its objectivity."

EDS, based in Dallas, aims to have 5 million of its users adopt the Microsoft programs in five years, Vice President Kevin Torgerson said.

Microsoft dropped 24 cents, or 1.2 percent, to $20.67 at 9:35 a.m. New York time in Nasdaq Stock Market trading. Hewlett- Packard fell 52 cents, or 1.5 percent, to $35.28 on the New York Stock Exchange.