Microsoft could make $2.5 billion in revenue from Office on iOS, an analyst has said.
Morgan Stanley analyst Adam Holt said that while the availability of Office on an iPad could sway some consumers to buy Apple's tablet rather than a Windows tablet such as the Surface, Microsoft could be denying itself at least $2.5 billion in margin revenue if it doesn't launch Office for iOS.
"Office on iPad could be a several billion dollar opportunity," Holt wrote in a research note last week. "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.
"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 per cent tablet share in calendar 2013," Holt continued.
Holt highlights that Microsoft sees up to four times higher attach rate for paid Office on Macs, at 30 to 40 per cent, compared with 10 to 15 per cent on Windows.
"The math is compelling and may drive Microsoft to move Office," he added, suggesting that he company could move its cloud-based Office 365 subscription and storage service, to iOS and Android.
"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 [you wouldn't need to sell it through the App Store] and drive greater adoption of Office 365, which has significant long-term benefits," Holt said.
“MSFT offers Office web apps which can be accessed through a browser, but these apps have more limited functionality than the traditional desktop version and Office 365 apps,” Holt noted. “MSFT’s free Office web apps let users view, create and do some basic editing using Office apps that run in the Safari browser on the iPad (or on a browser in an Android tablet), but it does not offer all features, such as track changes."
"Consumers can access Office web apps via SkyDrive for free although there is a 25 GB storage limit and 50 MB file size limit for Word, PowerPoint and OneNote files and a 2 MB file size limit for Excel. Office 365, which is MSFT’s subscription-based Office offering, is currently not available for use on iOS or Android-based devices. In our recent survey work, over 60% of respondents suggested Office was the most important feature to consider for a tablet and there is clearly demand for Office on the iPad," he concluded.
In January, Microsoft CEO Steve Ballmer suggested that it isn't necessary to offer app versions of the Office applications as people can access Office through the browser through Office on Demand.
However, experts have said that they believe Ballmer is wrong about Office for iOS because Office on Demand doesn't work with iOS or Android and the web apps aren't the same as the real thing.
In addition to Holts comments this month, Bob O'Donnell from research firm IDC said that Microsoft can "start printing money" when it introduces Office for iOS and Android. "If they wait too long, they risk people finding alternatives, or workarounds," he said.
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