We bet the bods at Microsoft's Mac Business Unit (MacBU) were crying into their cornflakes this morning. Just days after a red-faced spokesperson admitted that if Mac Office 2008 were an egg it'd still be inside a chicken, Apple delivered a firm wedgie with its announcement of iWork '08 . Grab! It's much cheaper than Office 2004 Standard. Wrench! There's a new spreadsheet program called Numbers. Yank! It does a better job of opening Office 2007 files than Office 2004 does.

We're big fans of Office 2004 - we're using it right now to write this - but it's hardly cheap: if you want the Standard edition, the RRP is £399.99. Discounting means a street price of around £267, but that's still a heck of a lot of cash for an office suite that's nearly three years old. In the meantime Macs have gone Intel, Office 2007 has changed file formats, and Office Mac 2004 has struggled to keep up.

It took Microsoft four months to provide a converter for Office 2007 .docx files (and that's a buggy beta - the final version won't ship until Office 2008 does. We've found its current incarnation to be very unreliable). And the release of Office Mac 2008 has been put back from late summer 2007 to January 2008 - "at least".

For now, that means Mac Office users are stuck in emulation mode, which means Office isn't taking full advantage of their Intel Macs.

Microsoft could afford to dither, because Apple's iWork wasn't a real Office rival. Pages was more of a layout program than a word processor, the suite didn't include a spreadsheet, and while Keynote is a mighty presentation program not everybody needs to create slides.

That all changed yesterday. Pages has been beefed up with more emphasis on word processing and easy formatting together with Word-compatible reviewing features and Word 2007 compatibility. And the new Numbers spreadsheet application could well make Excel look as old as PowerPoint seems next to Keynote.

Even Steve Ballmer's dancing couldn't make this look good for Microsoft. Where Office 2004 is ancient, iWork is shiny and new. Where Office 2004 has flaky handling of Office 2007 files, iWork imports them with ease. Where Office looks a bit clunky, iWork is sleek and streamlined.

Most importantly of all, while Office is £267, iWork is £55. That means for the cost of Office, Mac users could buy iWork instead and have enough cash left to buy a Zune. Ahem.