Microsoft is losing out on billions in revenue by not offering its Office suite of products for the iPad, according to a new analyst report.
Releasing a $60 Office for the newest iPads could add $1.3 billion in revenue, while extending it to Apple’s complete lineup of tablets could boost that to $2.5 billion, according to an analyst note from Morgan Stanley’s Adam Holt.
Holt pointed to the fact that Microsoft has a 30-40 percent Office attach rate on Macs for paid Office vs. 10-15 percent on Windows.
“Our conversations lead us to believe Microsoft will price for value with Office on the iOS and net 30 percent to Apple (which can be negotiated). Microsoft may get $50-70+ [per] Office unit,” Holt wrote. “If Microsoft got 30 percent attach in one [year] at $60 [per] unit on the ~200M base it is $2.5B in [revenue], more than the total amount of software [revenue] we forecast for Microsoft (Office + Windows) from 11 percent tablet share in FY14. The math is compelling and may drive Microsoft to move Office.”
It could also help Redmond recoup the approximately $5 billion in Office revenue it loses to piracy each year, Holt said.
Microsoft has not made any announcements about Office for iOS. At the Goldman Sachs Technology and Internet Conference this week, Peter S. Klein, Microsoft’s chief financial officer, was coy when asked about extending its suite to Apple’s platform.
“We’re always observing the marketplace,” Klein said. “We’ll evaluate those tradeoffs as we see that evolve.”
Microsoft has a history of cross-platform development, Klein said, pointing to Office for the Mac and the Web. There are “lots of things we’re doing to meet that need and we’ll continue to think about other things,” he said.
If Microsoft wants to avoid the 30 percent App Store cut to Apple, Holt suggested focusing on the subscription-based Office 365.
“Microsoft may open up Office 365 to iOS/Android versus making the application native, which may limit the near-term revenue, but would skirt the payment to Apple and drive greater adoption of Office 365,
which has significant long-term benefits,” Holt wrote.
Microsoft likely wants to focus on its own new OS, Windows 8, and its new, Apple-esque cross-product approach. But, Holt argued, “the limited availability of Win 8 touch devices has restricted consumer demand while the corporate upgrade cycle is slowing, which means the PC market may remain weak through CY13. Further, Microsoft may take longer to impact the tablet market than we first expected, and some of the weakness in PCs will impact Office as well.”
Late January stats from IDC put the iPad’s global market share at 43.6 percent. Microsoft did not make the top five, which was filled out by Samsung, Amazon, Asus, and Barnes & Noble.
By Chloe Albanesius, PCMag