CIO had an interview with Microsoft CEO Steve Ballmer, here's a snip:
CIO: Steve, I guess the $64,000 question from a lot of people’s point of view is, is there going to be an Office for the Web, something that really competes head on with Google Docs, Google Apps?
Ballmer: Well, those are not very popular products! I hope that we are not competing head on with those! I hope we actually compete head on with Microsoft Office. If you take a look at it, Google Docs and Spreadsheets have relatively low usage and have not grown over the last six months or so.
There’s a reason. I think what people want is something as rich as Microsoft Office, something that you can ‘click and run’, if you are not at your own desk. Something that is compatible, document-wise with Microsoft Office and something that offers the kind of joint editing capabilities that is nice in Google Docs and Spreadsheets. Will Microsoft Office offer that? Yes! Standby for details in the next month.