Google Further Tests Microsoft's Domain - WSJ.com

Meanwhile, while Google tries to have it both ways (going for desktops while continuing to assert it doesn't mean to directly challenge Microsoft Office): 

Chris Capossela, vice president in Microsoft's Business Division Product Management Group, plays down any worries about competition from Google. "My biggest concern is making sure people see what we've done with Office 2007," he says.

Source: Google Further Tests Microsoft's Domain - WSJ.com