Microsoft Corporation (MSFT) is expected to reveal Microsoft Office Suite for the iPad, marking a bold new strategy from the legacy tech giant
Microsoft Corporation’s (MSFT) stock climbed 3.9% yesterday on the news that Microsoft Office Suite will be made available for Apple Inc.’s (AAPL) iPad. The news, which was broken by Reuters on Monday, stated that the company’s chief executive, Satya Nadella, is set to unveil the product on March 27 at an event being held in San Francisco. The event will be Nadella’s first public appearance for a product release since succeeding Steve Ballmer.
The new iPad product will have limited capabilities in the free version, while they are available in the premium version through a paid subscription of the internet-based Office 365 software. Prior to this news, Office suite was available for iPhone users or through Microsoft’s online office suite using the Apple’s Safari internet browser.
This proved cumbersome for most users, who instead used competitors like Apple’s iWork. It also lead to the creation of several other office productivity applications like Google Inc.’s (GOOG) Google Docs, SoftMaker’s FreeOffice, and other cloud-based services to cater to office processing needs.
Nadella in Office
Nadella took over with the mantra of “Mobile first, Cloud first,” and is setting a strong tone for what can be expected from Microsoft as it goes forward with this product. The office suite is the most widely used office tool, and opens doors for the company to make its star product available across multiple platforms.
The news caused the stock price of the company to soar to levels that were experienced just prior to the dotcom bubble. This was because Microsoft was being pressured and had expectations set for it by investors to tap into the iOS app market. Offices are increasingly using mobile devices like tablets and smartphones, and the iOS share of the market is the second-largest in the tablet industry, trailing Android.
As of 2013, iOS platform tablets had 36% of the global tablet market share, according to Gartner research. The new Microsoft Office product for iOS, if adopted by even a quarter of the users, will bring in over 17 million subscribers. Assuming the price point will be that of Office 365 Home Premium of about $96 per year, Microsoft would add about $1.7 billion in revenues.
Recently, Microsoft began offering OneNote for free on all platforms, and the product also debuted on the Mac. The OneNote app became the most-downloaded app on the Mac app store within a day of its release. This adoption by iOS users signifies that Microsoft Office Suite products are still in high demand, and the newest integration will be very fruitful for Microsoft.
The move has received mixed reviews from sell-side analysts, from those who supported the strategy of Microsoft Office’s exclusivity to the Windows platform to those who support multi-platform usage of the product.
Analysts at Citigroup believe that the move will hurt the company in terms of it attracting consumers towards Windows through the MS Office Suite. “If Office were available on iPad and Android, we see few reasons a consumer would buy a 10″ or 7″ a Windows tablet […] We do believe that securing the viability of the Office franchise is more important than preserving the future of Windows (especially in Consumer).”
Citigroup had downgraded the stock to Neutral in January, and reiterated a caution on the stock based on the news. Barclays, on the other hand, has given an Overweight rating to the stock, and they believe that the company is taking a new direction with its products rather than sticking to its strategy under Ballmer.
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