Is Office on iPad worth $2.5bn to Microsoft?
By Nicole Kobie
Posted on 18 Feb 2013 at 09:47
Microsoft has so far refused to sell a full version of Office for the iPad - and that could be costing it billions, according to one analyst.
In a research note last week, Adam Holt of Morgan Stanley said Office for iOS could be worth $2.5bn in revenue a year to Microsoft, according to a report in Forbes.
"Office on iPad could be a several billion dollar opportunity," Holt writes in his research note. "While [Microsoft] has resisted offering a full version of Office for the iOS, the company may ultimately decide there is more upside with Office on iPads, particularly if [Windows] tablets fall short of expectations."
Holt doesn't think Office Web Apps, which are accessed through a browser, offer enough functionality, adding that a recent survey by his firm suggested 60% of respondents thought Office was key for tablet use.
That's one reason Microsoft may choose to hold Office back: it's a selling point for its own Surface tablets, as well as those made by third-party manufacturers running Windows 8.
"The Surface RT likely sold only 900,000-1 million units in calendar Q4, while OEMs have pulled back on tablet builds and it may be difficult for [Microsoft] to reach much more than 10% tablet share in calendar 2013," Holt added.
Holt suggested Microsoft may not make a native app for iOS or Android, but instead open up Office 365, its subscription based version of Office. Using Office 365, Microsoft already offers apps for One Note and Lync for iOS and Android handsets, but has yet to extend support to other programs; Windows Phone supports the whole suite. Such a move would also "skirt the payment to Apple", he noted, while still boosting adoption of Office 365.
By the numbers
While the $2.5bn figure may sound high, Microsoft pulled in annual revenue of $24bn from its Windows Business division, out of its total $73.7bn for 2012.
According to its annual results filing, 90% of that $24bn is from Office alone, and 80% is from business sales - for the iPad to boost Microsoft's Office sales by as much as 10%, it may need to make further in-roads into businesses first.
I think some of the analyst's analysis is missing from this article.
He starts out criticising Office Web Apps and then suggests that Microsoft will not provide native iOS and Android Office Apps. If that is what he means by 'opening up' Office 365, then he appears to have contradicted himself. Baffled.
By c6ten on 18 Feb 2013
I think I can see what he's talking about, but really this is like reading tea-leaves. Why can't these analysts express themselves in plain English? Good luck with the App Store, Microsoft. Apple are going to need a quid pro quo to surrender their 30% cut.
By c6ten on 18 Feb 2013
The Unasked Question...
How many MS tablet sales will be generated based on the fact it has MS Office? This figure needs to be subtracted from $2.5b to get the real figure. From a purely subjective view, I suspect many businesses will buy MS tablets for purely this reason and therefore that $2.5 billion will be a lot smaller. Very anti-competitive if you ask me though! I do believe MS will do the right thing eventually (just like Google maps for iphone) and bring it out for other platforms otherwise they risk alienating their customers and pushing up demand for alternative office platforms and solutions
By domster2 on 18 Feb 2013
Helping the competition
The real problem for MS here is that the majority of tablet users are using other office suites. We have already found documents that Libre Office renders happily and yet Word 2010 grinds to a halt on them.
By tirons1 on 18 Feb 2013
I thought one of the main sticking points is Apple's subscription rules. They would want 30% of every Office 365 sub sold through iOS which MS won't want to give.
By james016 on 19 Feb 2013
How the times change - and MS doesn't...
Remember when MS invested in Apple, as it was in severe trouble, and so kept it's huge Mac Office sales and user base? Ahh, the good old days, so distant now! Unfortunately MS are stuck in a rut, they have a huge Corporate footprint (good), but are completely alienating and ripping off the Domestic users (Licences for Office 2013-and no DVD). Meanwhile there is no sign of Office, for either iPad or Android, two of the hugest-selling hardware products out there (Android phones outsell iPhones by a big margin). How can MS be so blind and stupid? The worst thing to do in a crisis is simply rip off your customers as opposed to create innovations for the future!
By Wilbert3 on 25 Feb 2013
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