Microsoft so far has declined to produce a version of its popular Office productivity suite for Apple's iOS. That makes it more difficult for millions of iPhone and iPad users to work on Microsoft Word, Powerpoint and other documents on their mobile devices. But it also means Microsoft could be leaving billions of dollars on the table.
Indeed, according to Adam Holt, an analyst at Morgan Stanley, Microsoft could be missing a $2.5 billion opportunity in choosing not to offer Office on the mobile platform. Although Microsoft makes its CRM software available for the iPad, Apple users are left in the cold when it comes to other Microsoft productivity apps.
"While MSFT has resisted offering a full version of Office for the iOS, the co. may ultimately decide there is more upside with Office on iPads, particularly if Win tablets fall short of expectations," Holt wrote in a research note. "The Surface RT likely sold only 900K-1M units in CQ4, while OEMs have pulled back on tablet builds and it may be difficult for MSFT to reach much more than 10% tablet share in CY13."
Money Money Money
So how does Holt get to the $2.5 billion? It's not much of a stretch, really. Holt figures attaching Office to new iPad units for the fiscal year 2014 could add $1.3 billion in revenue. And that's really the low side. That number supposes only 30 percent of iPad users would install Office on their iPad. If every iPad user opted to install Office, that number rises to $2.5 billion. Android sales could add even more to the total.
As Holt sees it, Office exclusivity on Windows tablets is important, but the iPad opportunity may be larger. He points out that Microsoft actually sees a three to four times higher paid Office installation rate on Macs (30 percent to 40 percent) than Windows machines (10 percent to 15 percent).
"Our conversations lead us to believe MSFT will price for value with Office on the iOS and net 30 percent to Apple (which can be negotiated), MSFT may get $50 to 70+//Office unit. If MSFT got 30% attach in one yr. at $60/unit on the ~200M base it is $2.5B in rev. -- more than the total amount of software rev. We forecast for MSFT (Office + Windows) from 11% tablet share in FY14," he wrote. "The math is compelling and may drive MSFT to move Office."
To Sell or Not To Sell (Office)?
Michael Cherry, an analyst with Directions on Microsoft, said that if Microsoft offered Office for the iPad, many people would probably buy it and it indeed would drive a new revenue stream.
"Consumers would pay a price for Office that's similar to what they pay for most apps. The downside is it could slow the sale of more-expensive PCs with more-expensive versions of Office. It would probably cannibalize sales somewhat on other platforms," Cherry told us. "There's a case for and a case against doing it. People would probably buy it, but the more interesting question is would they use it?"
For Cherry's part, he would not use Office on the iPad and doesn't use Office on his Microsoft Surface RT, either. He uses Evernote to take notes. If the notes need to be presented in a cleaner format, he e-mails them to his laptop and transfers them into Office.
"I do content creation on my iPad, but I don't have to do the final formatting of my work on it," Cherry said. "I'm sure that a lot of iPad users would buy Office. I'm not sure it would be the No. 1 application they use on the device, however. The attributes of tablets don't lend themselves to Office."