Google has acquired Writely, an online word processing application.

Writely, which is the first product developed by a small Silicon Valley startup called Upstartle, says on its website that it has shut down new registrations because it has been acquired by Google.

Terms of the deal were not disclosed and Google did not respond to requests for an interview.

Writely is a web-based, collaborative document editor, but Upstartle believes it is an entry point to a new way to manage documents, projects and websites online. The software is offered today as a free service in the software-as-a-service model.

Premium plans?

In December, Upstartle co-founder Sam Schillace said that Writely planned to introduce a premium level of service
(presumably for a fee) that was geared more toward corporations and corporate workgroups and would include document and user specific permissions. He said it would include password-protected documents and user accounts.

Writely already contains RSS integration so users can track changes made to a document and it supports full revision history on every document. Users also can post documents to a blog from Writely and they can create webpages within the service.

Upstartle co-founder Claudia Carpenter wrote on her blog Thursday: "Yes, we've been acquired by Google, and we're really excited about this for many, many reasons." She said the number one priority is to "maintain (and improve) the reliability, privacy and security of the Writely service for our current users."

She said Writely would soon move to Google's architecture in anticipation of a flood of new users. Current Writely customers will still be able to use the site.

Google plans to take on Office?

In October, Google announced a pending partnership with Sun and ignited buzz that it was developing a set of online productivity applications to rival Microsoft. The buzz was way off the mark as the deal centered on distribution of Google's toolbar with Sun's Java Runtime Environment software.

But at the time, Goldman Sachs analyst Rick Sherlund wrote in a research note: "We suspect both Yahoo and Google will want to extend their email products to look a lot richer and more like Microsoft Outlook (adding calendar and contact management) and may decide to throw in spreadsheet and word processing capabilities while they are at it to be more competitive with Office."

Writely could be that ingredient in the mix since it is an applications developed using the Asynchronous JavaScript + XML (AJAX), a set of programming controls that allows user to create web-based applications that behave like desktop software.

Google has exploited AJAX for some of its most eye-popping services such as GMail and Google Maps.

Google consolidates for future gains

Writely was not the only news Google made on Thursday. The company announced it had agreed to pay $90 million to settle a class-action lawsuit over "click-fraud".

In addition, on Tuesday the company inadvertently posted internal financial projections on its website, according to a story on CBS Google disclosed that it was projecting advertising revenue would increase 58 per cent from $6 billion in 2005 to $9.5 billion in 2006. The company said the information should not be regarded as financial guidance.