Is Microsoft a threat in email too?

Given yesterday's release of IE 4.0 and its Outlook Express email software by Microsoft (MSFT), a message to the software giant from competitors Eudora and Lotus could read just like that.

Microsoft is bundling Outlook Express as an email option with its IE 4.0. While Outlook, Lotus Mail, and Eudora all tout incoming mail sorting and spell-check features, Outlook Express is packed with additional features that may give Eudora and Lotus a run for their money, such as push technology, newsgroup readers, and the ability to search for email addresses at other locations.

"Microsoft is new competition, and it's pretty substantial competition," said Eric Zimits, an analyst at Hambrecht & Quist.

A Lotus spokesman acknowledged that Outlook Express will present some competition for its Lotus Mail software, though Eudora seems less concerned.

Unlike Microsoft, Eudora, a unit of Qualcomm (QCOM), makes its money selling Eudora Pro email and messaging-server software to corporations, small offices, and multiuser licensees, which account for roughly 60 percent of revenues, said Tracy Crowe, a senior product marketing manager. The remainder comes from consumer sales.

"Outlook Express is a nice browser email application. Microsoft did a good job incorporating HTML, and the fact that it's bundled with Explorer is nice," Crowe said. "But we focus on more productive and efficient communications. We are a communications company."

Qualcomm, which does not break out Eudora revenues in its accounting, uses the email software as part of its larger strategic business of melding messaging and wireless communications, Zimits said.

As a result, Qualcomm likely will spend research and development dollars, as well as other resources, to keep Microsoft at bay, Zimits said.

Another Microsoft disadvantage in the email software market is that it faces the difficult task of persuading companies and consumers to switch from their current email applications.

"Eudora has a huge installed based, and everyone seems to like it," Zimits said. "There are a lot of users who are already using email, and Microsoft has to determine how to [prompt users to switch from] client offering to another."

Eudora grew from 10 million users to 18 million between January and this month, said Ed Knowlton, a senior marketing manager. Nonetheless, he noted that Eudora would be foolish not to consider Microsoft a threat.

"Our sales have been booming, and our marketshare has been booming. But I would be lying if I said we didn't care what Microsoft and Netscape (NSCP) are doing," he said.

Still, Crowe noted that Eudora's role is different from Outlook's. He stressed that Eudora is a lean, efficent communications tool that can be customized.

The next version of Eudora Pro is expected to ship in December.