Microsoft Office On iPad Would Hardly Be A Game Changer – Forbes
A big recent move in Microsoft stock has been driven by the speculation that Microsoft will release Office for iPad on March 27, 2014; this was reported by several news sources including Reuters.
If the speculation is true, there is certainly something to celebrate in that the new CEO, Satya Nadella, is willing to depart from the policies of his predecessor, Steve Ballmer. In spite of the popularity of the iPad, Ballmer refused to make Office available on iPad. In the process, he left billions of dollars in revenue on the table. Only time will tell if Ballmer’s reasoning was correct. If Office had been available on iPad from the beginning, Microsoft would have had greater difficulties in adoption of its Surface tablet.
Bulls are excited about the revenue Microsoft will generate from selling Office for iPad. For example, Ross MacMillan of Jefferies predicts $4 billion of additional annual revenue for Microsoft. However, the exuberance for Microsoft selling Office for iPad may be misplaced.
First of all, adding $4 billion of annual revenue to Microsoft’s $78 billion dollars in revenue is not that significant.
Second, the $4 billion revenue estimate may be overly optimistic simply because iPad users have become accustomed to competing products such as Google Docs and Apple’s iWork. Microsoft Office certainly provides more functionality than competitors but tablets are mostly used for content consumption and light content creation. It is difficult to see why a typical iPad user will switch from whatever program they are using now to Office unless their employer is paying for an Office subscription.
Third, the Office as it exists today does not take full advantage of the iPad interface. Even though there are some touch friendly features, Office is still mostly in the legacy of PCs. Unless Microsoft announces a new version of Office, many users may not choose to switch to Office because of its inelegant interface even if their employer is picking up the tab.
Fourth, the main reason for buying Microsoft Surface tablet has been the Office suite. When Office becomes available on iPad, iPad is bound to siphon off sales of Surface.
On the other side, Apple has many potential catalysts ahead, the biggest being introduction of a large screen iPhone 6. This week Barron’s speculated that a new larger screen iPhone could boost Apple stock by 20%. Unless Nadella has more surprises, Microsoft stock may be due for a pullback.
Disclosure: Subscribers to The Arora Report have a long in Apple.