Microsoft leaving $2.5 billion per year on the table by holding back Office from iPad

Posted:
in iPad edited January 2014
Microsoft's reluctance to bring its industry-standard Office productivity suite to Apple's iPad may give the software giant a modicum of leverage in the new computing environment, but one analyst says that policy means Microsoft is leaving $2.5 billion a year on the table.

Morgan Stanley's Adam Holt says that, while Microsoft has so far held back from bringing Office to iOS, the ongoing popularity of Apple's mobile operating system may prove too big a draw, especially if Windows RT and Windows 8 tablets continue to underperform in sales. With Surface RT estimated to have sold only between 900,000 and one million units in the fourth quarter of 2012, even improved sales brought on by the Surface Pro are likely to pull Microsoft only to a 10 percent share in the tablet market in 2013, by Holt's estimate.

iOS office
Keeping Office off iOS could be costing Microsoft billions.


Ignoring Apple's iPad, the overwhelming tablet market leader, may give Windows 8 and Windows RT tablets an exclusivity boost Microsoft feels they need, but Holt says that a 30 percent attach rate on the iPad's install base would generate $2.5 billion in additional revenue.

Holt's figures are based on a number of factors that are up for argument. As mentioned before, Holt assumes a 30 percent attach rate among iPad users, due almost solely to the Office name. He justifies this by pointing to the attach rate Office sees on Macs, which is between 30 and 40 percent of the Mac install base. That figure is about three times higher than Office's attach rate on Windows machines, 10 to 15 percent.

Office 365, too, could add to long-term value for Microsoft, were the company to bring it to iOS. Holt, though, believes Microsoft may open up the platform to iOS and Android instead of developing a native app, thereby circumventing the 30 percent cut Apple takes on iOS subscription content.

Holt's analysis paints a difficult choice for Microsoft: abandon the one advantage it has over competitors in the hopes that it will reap more in revenues, or hold on to that advantage and continue on, albeit on a smaller platform.

Meanwhile, The Wall Street Journal's Digits blog looks at Microsoft's situation, noting that the company risks sacrificing Office's growth if it insists on "keeping the umbilical cord with Windows intact."

Microsoft's decision, according to WSJ, is similar to one Apple faced when faced with the iPad and iPhone's popularity growing in part at the expense of the Mac. If Microsoft develops Office for iOS and Android, it loses leverage and undercuts the PC ecosystem that has supported the company for so long. If it holds back, it risks Office being usurped by any number of competitors.

Microsoft has been rumored for some time to be prepping a mobile version of its Office suite, but those rumors have yet to materialize. In December, a page on the company's website made mention of Office for iOS, and company representatives have stated as much publicly. The company, though, has yet to make any official announcement.
«13

Comments

  • Reply 1 of 47
    Interesting, a Software company giving priority to hardware over their software. The Office team at MS must be going nuts over this.
  • Reply 2 of 47


    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?

  • Reply 3 of 47
    solipsismxsolipsismx Posts: 19,566member
    I can't blame them. They've invested in the Surface and their Windows products. I agree they are leaving money on the table but if the Surface or Win tablets make it then MS would have made a bad choice. I'm sure few here think it was never possible with over a decade of failure with Windows on tablets but they didn't go to all this trouble without at least hoping for the best.

    All they are really giving up right now if their Win-based tablets fail are short term MS Office on iOS sales unless something else can truly replace the MS Office brand, which I don't think is likely.

    bdkennedy1 wrote: »
    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?

    MS Office is still considered the de facto suite. I wish Apple would add more enterprise level features and market it more but they don't seem to care to much about it.I hope that changes soon.
  • Reply 4 of 47
    Yeah, but you could just as easily say Microsoft is "leaving money on the table" because all of the stupid things they do.
  • Reply 5 of 47
    mvigodmvigod Posts: 172member
    Classic Innovators Dilemma (great book). If Ballmer was smart he would look forward and cannibilize the tablet war they are losing and sure to keep losing
  • Reply 6 of 47

    Quote:

    Originally Posted by bdkennedy1 View Post


    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?



     


    Wake me up when Pages and Numbers shows up and is a far more capable and extendable set of office needs. iWorks could dominate the office market on OS X and iOS if they were sold as a package set where the power of the iWorks on OS X had a solid 3rd party API to extend services to the likes of Matlab, R, Octave, PostgreSQL, SQLite, Oracle, etc., to embedded services like TeXLive, etc.,.


     


    Apple has no requirement to keep iWorks limited but it does.

  • Reply 7 of 47
    jeffdmjeffdm Posts: 12,946member
    bdkennedy1 wrote: »
    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?

    iWorks is more consumer software, though very good consumer software. There's nothing wrong with that, but I don't think they're really competing squarely against Office. Out of the group, Keynote is most comparable to PowerPoint. I think of Pages more of a page layout program than a word processor like Word. Excel and Numbers are the least comparable in my opinion.

    If Microsoft has delusions that Windows 8 tablets can take down the iPad's dominance, then I can understand why they don't offer it. Another is software pricing for iOS software is a bit on the starved side compared to Microsoft's pricing. I don't know if they can offer Excel for iPad for $99 and get traction.
  • Reply 8 of 47

    Quote:

    Originally Posted by mdriftmeyer View Post


     


    Wake me up when Pages and Numbers shows up and is a far more capable and extendable set of office needs. iWorks could dominate the office market on OS X and iOS if they were sold as a package set where the power of the iWorks on OS X had a solid 3rd party API to extend services to the likes of Matlab, R, Octave, PostgreSQL, SQLite, Oracle, etc., to embedded services like TeXLive, etc.,.


     


    Apple has no requirement to keep iWorks limited but it does.



     


    I wonder how many people who are really using PostgreSQL within office.  iWorks is a solid and good enough suite for most of us, Office is way too much clutter with unused and duplicated function, even Bill Gate loss is track of Office features.

  • Reply 9 of 47
    saareksaarek Posts: 1,128member

    Quote:

    Originally Posted by bdkennedy1 View Post


    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?



    At least Microsoft bothers to update Office. iWork on the Mac is in a very sorry and neglected state which is a shame because it's good and could have been great.

  • Reply 10 of 47
    saareksaarek Posts: 1,128member


    Office on the iPad would speed up enterprise adoption and this may be what MS is so scared off, they're kind of in a damned if I do and damned if I don't rut. Long term though it would be in their interest to release Office onto iOS. At least this way they can keep their main revenue stream going.

  • Reply 11 of 47

    Quote:

    Originally Posted by bdkennedy1 View Post


    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?



     


    Others pointed out that MS Office is far more feature-rich, but also consider broken formatting for complex documents. This plagues all MS Office alternatives, and Office is the standard in business.


     


    I use iWork for pretty much everything (I do a lot of page layout stuff and Pages is nice to use), but I have a copy of Office just in case I'm worried about compatibility when sharing files.

  • Reply 12 of 47
    jragostajragosta Posts: 10,473member
    bdkennedy1 wrote: »
    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?

    Because Office is the standard and many companies insist on using it. That's at least partly due to the fact that 99% compatibility may not be good enough.

    However, the article misses a major point. It's not $2.5 B at stake - it's the entire Office business. Right now people think "Microsoft Office" for word processing, spreadsheets, etc. The more that people have to evaluate and use alternatives, the less Office becomes a 'must have'. If users find that Pages or something else works well enough for them on the iPad, they may consider it elsewhere, as well.
  • Reply 13 of 47
    Companies worried about paying Apple 30% are silly. It would cost more to make physical copies and distribute, ship and market them and even sales online have support, marketing and transaction cost. That's why so many developers jumped at the chance to develop for IOS
  • Reply 14 of 47
    nikon133nikon133 Posts: 2,600member
    mvigod wrote: »
    Classic Innovators Dilemma (great book). If Ballmer was smart he would look forward and cannibilize the tablet war they are losing and sure to keep losing

    No, it is not so sure they are losing tablet war. It is sure they entered war late. But late-comers are not necessarily loosers, much as history taught us.

    Anecdotal as it is, we have recently started showing small Atom based tablets running full Win 8 to our customers, and response is far better than we expected. I'd say it is amazing, but not many people here would believe me. It is, however, very much in line with study AA published here recently, which showed that Win 8 tablets were actually more desired than iOS tablets. This is what we are getting onsite.

    And... Why not? For comparable price (for Atom based tablets), you get comparable size, weight and battery life. You get to choose premium, workhorse or cheap plastic look & feel (and save some extra $ if you don't mind plasticky). You get to choose docks, keyboards with or without secondary battery, digitisers or not. And you get full compatibility with work requirements, albeit on slow side of scale.

    Much as I played on Atom tablet, Modern UI and apps are silky smooth. Desktop apps are easier to choke tablet - especially if one has habit to open plenty of them - but Office on this still performs much better than Office on RT tablets... and again, it is fully featured. And every other app, service... will work without need to re-invent the wheel.

    From IT departments point, it makes sense. These can be managed. Made part of domain. GPs applied. PC remote management agents, like Kaseya, installed.

    From users' point, this is less frustrating than using iOS, regardless of how much they might love their iPads. Support is easier to get. And everything works same as on their desktops/laptops, no need to learn new software (or tablet version of the same software).

    When you consider all that, it is hardly surprise MS doesn't want to help iOS to grow strong(er) in enterprise. That would be biggest self-backstabbing they could fork out today. Not only to themselves, but also to their partners who depend on MS offering them something that competition cannot claim to have.
  • Reply 15 of 47
    malaxmalax Posts: 1,598member


    $2.5B has to be wrong, right?


     


    Even at $50/person (for some mix of apps), $2.5B a year implies 50 million people buying Office.   Both of those numbers seem on the high side.  Excel and Word are the big draws.  People might want PowerPoint, but it's such a basic app, I can't see people paying more than $10 for it.


     


    And if these are native apps, you're not getting one sale per device or even one sale per person; you're getting on sale per family.  For my Macs I have to license a few copies of Office, and I buy a new copy every few years; but I have Pages running on 3 iPads, 3 iPhones, and a few iPod touches for the 1 $10 I paid years ago.

  • Reply 16 of 47
    nagrommenagromme Posts: 2,834member
    I have two versions of Office on my iPad already. OnLive desktop and CloudOn.

    In practice, I'm more likely to view Office documents than edit them (even on my laptop), and iOS can view them natively. But it's nice to have options!

    Office on iPad seems like a niche market, though; Office is the kind of thing that plays to the strength of trucks... er, computers. Apple's Numbers on iPad is awesome; for Excel, I want a mouse, keyboard, big screen, chair, and mug of headache remedy.

    Doesn't mean the niche wouldn't be profitable!
  • Reply 17 of 47
    malaxmalax Posts: 1,598member

    Quote:

    Originally Posted by nikon133 View Post



    From IT departments point, it makes sense. These can be managed. Made part of domain. GPs applied. PC remote management agents, like Kaseya, installed.



    From users' point, this is less frustrating than using iOS, regardless of how much they might love their iPads. Support is easier to get. And everything works same as on their desktops/laptops, no need to learn new software (or tablet version of the same software).



    When you consider all that, it is hardly surprise MS doesn't want to help iOS to grow strong(er) in enterprise. That would be biggest self-backstabbing they could fork out today. Not only to themselves, but also to their partners who depend on MS offering them something that competition cannot claim to have.


     


    Good points.  We could very well see a surge in Windows tablets provided by business to their employees.  I don't think that will necessarily hurt iPad sales though.  Locked down tablets for work; personal iPad for home. 

  • Reply 18 of 47

    Quote:

    Originally Posted by Landcruiser View Post



    Interesting, a Software company giving priority to hardware over their software. The Office team at MS must be going nuts over this.


     


    You are correct -- a software company would jump at the chance to put an app suite like Office on the iPad, but Microsoft is now a hardware company. Did you not get Stevie B's memo?


     


    Quote:

    Originally Posted by bdkennedy1 View Post


    Who would buy it? Pages, Numbers and Keynote can already read and write Microsoft documents. Why would I spend whatever outrageous price Microsoft would charge when I can get Pages for $10?



     


    With the increasing number of Fortune 500 companies trying or buying iPads, there is a huge potential for selling Office for iOS to the enterprise.

  • Reply 19 of 47
    drblankdrblank Posts: 3,383member
    Typical Microsoft tactics. Wait to release a version of a popular Microsoft product on other platforms to give their own Windows OS a leg up on the competition. More reasons to split Microsoft up.

  • Reply 20 of 47


    I've already switched from Word to OSX Pages and from Outlook to OSX Mail/Contacts. If only they could build a real Excel competitor. Numbers is ok but nowhere near the power of Excel. Update Numbers with a VBA-like programming language and I'll ditch Office forever.

Sign In or Register to comment.