Microsoft Makes Big Bet on Apple’s iPad
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Microsoft (MSFT) is no longer holding a poker face. All bets are on the iPad. Microsoft’s CEO Satya Nadella reveals the Microsoft Office designed for iPad. This is a huge step for Microsoft. Do we smell change in the business plan?
Satya Nadella says, “Our commitment going forward is to drive Office 365 everywhere – that means across the web. Across all phones, across all tablets, across PCs.”
A MSFT employee showed off the new Office for iPad during a little demonstration. The greatest part about it? It’s free. So all users can download the app at the click of a button. However, they must pay a fee to create or edit in applications: Word, Excel, Powerpoint. When they purchase a subscription from Microsoft, it’s smooth sailing. Moor Insights & Strategy’s President, Patrick Moorhead, argues that MSFT is using the right strategy.
Patrick Moorhead says, “The interesting thing here is that you can’t actually buy Office 365 off of the iPad. What you can do is you can engage and sign up if you have an Office 365 application. So it’s not actually transacting business inside of the iTunes store which is a pretty smart move for Microsoft.”
Expected revenue is gauged between less than $1 billion and nearly $7 billion, per some analysts. Supposedly this “touch-first” version has been done for years. But, the company held off, afraid it would hurt its legacy windows operating system.
NYU Stern School of Business’ professor J.P. Eggers claims the Thursday announcement could be Microsoft’s death knell.
J.P. Eggers says, “In some ways it’s actually getting rid of the old. The piece that was the legacy business – the biggest legacy for the company – and going and saying, ‘Look, it’s back to what the firm has done well for a long time, which is the Office suite.’ But it’s kind of saying [that] we’re going to favor one of the children of the company as opposed to the other, as opposed to trying to keep them together as they’ve been doing for the last 20-something years.”
He also expect Microsoft’s precious tablet to take a major hit. It’s Surface tablet has already suffered poor sales. Let’s not forget Microsoft’s purchase of Nokia’s devices and services business (which was headed up by Nadella’s predecessor Steve Ballmer) . . .
J.P. Eggers says, ”Based on what we saw today and what we’ve been seeing, you have to think that Nadella would want to undo the deal with Nokia if they could – that there’s just no good reason to go down that path – because that really was a strong push to try and have a real space in the actual physical operating system for the mobile platform.”
He’ll likely have to bite the bullet and accept that transaction as a sunk cost, per Eggers. The bright side for Nadella could hold large dividends with the company’s refined strategy.