The gloves are off. Microsoft is ready to take on Intuit for the dollars of small-business managers.

Microsoft confirmed on Friday — a few days earlier than it originally planned — that it is working on a new version of Microsoft Office aimed specifically at small-business managers. The new product, code-named "Magellan," will ship in late 2005, Microsoft officials said.

The new Office release will include the existing Office 2003 core set of programs, plus a new product, Microsoft Office Small Business Accounting. It also will include an updated version of Outlook 2003 with Business Contact Manager, the personal-information-management product that Microsoft first rolled out as part of Office Small Business Edition 2003.

Microsoft is partnering with Automatic Data Processing Inc. (ADP) Small Business Services to offer integrated payroll services as part of the new Office release. Users will be "presented with tightly integrated self-service and fully outsourced payroll services, including signature-ready tax forms, integrated checks and other online forms, as well as support for direct deposit," according to a Microsoft press release, issued Friday.

Microsoft is aiming the new Office SKU squarely at Intuit, a company that Microsoft attempted to acquire in 1994. Microsoft was interested in Intuit's Quicken personal-finance software, and as using Intuit as a conduit to gain a larger share of the online banking/finance market. After the Department of Justice made it clear that it might not look kindly on a Microsoft acquisition of Intuit, Microsoft dropped the attempted purchase.

More recently, Intuit launched in late October its 2005 version of its QuickBooks small-business line. As part of its QuickBooks 2005 rollout, Intuit launched a new, in-house payroll-processing service for accountants and small businesses called QuickBooks Enhanced Payroll Plus.

Microsoft is planning to position the new Office small-business-manager release as a stepping stone for small business that might want to upgrade to more full-fledged financial-management and CRM offerings. The Microsoft Business Solutions unit at Microsoft offers financial management modules as part of their four ERP products (Great Plains, Solomon, Navision and Axapta). It also is the division at Microsoft spearheading the development of Microsoft CRM.

It's not clear the extent to which Microsoft is planning on selling the new Office for small business management product through the retail channel. On Friday, company officials emphasized that the company is looking to reseller partners and independent-software vendors to push the new product. Microsoft is planning to make a software development kit available to partners to develop applications that integrate with Microsoft Small Business Accounting.

Microsoft officials were not available for comment on Friday.