Microsoft Office is one of the biggest cash cows Redmond has, and so they obviously have a very high interest in protecting it. That is why it is not even a remote surprise to see Microsoft lashing out at at Google Apps, which is Google's online "productivity suite".
Launched as a more or less rival to the infamous MS Office, Google had to expect that their online programs would earn Microsoft's ire. They are attacking it from several angles, such as its online-only functionality, the lack of "power" features, the reliance of many businesses on integration with MS Office and more. In a very cold statement, they even claimed that Google's enterprise customers were more or less non-existent and insinuates Google might not be trustworthy:
"Their enterprise focus and now apps exist on the very fringe, and in combination with other fringe services only account for 1 percent of the company's revenue. What happens if Google executes poorly? Do they shut (them) down given it will (affect) them in a minimal and short-term way? Should customers trust that this won't happen?"
They also slammed Google on their long beta periods for software. I think that is the pot calling the kettle black, as most Microsoft OS releases are more or less grand beta releases, especially so with XP and Vista. They do raise some valid points about deploying Google Apps (or any online applications for that matter) in the workplace, however. And since Microsoft is also known to be interested in subscription-based software, I think they are actually enjoying Google's deployments since they get to see how similar services actually function in the real world.