Is Office on iPad worth $2.5bn to Microsoft?
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.