By Jessica Hodgson
Of DOW JONES NEWSWIRES
SAN FRANCISCO -(Dow Jones)- Microsoft Corp., (MSFT) in a move highlighting the growing competition to offer customers so-called "cloud" office applications, has cut the price of its Exchange Online email services.
The company is now charging $10 per user per month for the service, where Microsoft hosts email services on behalf of its clients. It previously charged $15 per user per month.
The price cut also gives users access to a range of services including productivity tools from the Office suite like Word, all of which are stored on Microsoft's own servers.
Microsoft's counterblast comes after Internet search giant Google Inc. (GOOG) publicized a high-profile win in the corporate software space.
Both companies are trying to win "cloud computing" business in which business software is operated by companies on a hosted basis on behalf of their customers and typically paid for on a usage basis.
Last week it emerged that Google has won a contract to manage 30,000 email accounts on behalf of employees at the City of Los Angeles.
Business Division President Stephen Elop, speaking at a press conference in London, denied that the price cut was a response to Google's challenge.
"They (Google) have definitely been out there claiming some pretty big numbers, but a number of their claims aren't holding up," he said, adding that in many cases Microsoft believed that Google services were purchased incrementally to Microsoft ones.
Google didn't immediately respond to a request for comment.
Microsoft's challenge is to grab a greater slice of the burgeoning market for online software services without damaging the profitability of its products, the vast majority of which are still hosted and used on PCs or corporate servers.
Analysts recognize Microsoft needs to offer services online to compete with rivals such as Google, although they have expressed concerns that the services could damage profitability.
Microsoft, in a Monday press release, touted a number of customer wins including McDonald's Corp. (MCD), Rexel S.A. (RXL) and Aviva PLC. (AV), and said that it is expanding its online email services to 15 additional countries.
Microsoft shares recently fell 1.3% to $27.51.
-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com