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Summary

  • The company has finally made an effort to tap the mobile office market.
  • The strong position in the desktop office user base will allow the company to capture a larger market share.
  • The user friendly features will make the adaptation easy for users.

Microsoft (NASDAQ:MSFT) has finally launched its long-awaited Microsoft Office for iPad. There were rumors that the company had it ready for quite some time but the launch was delayed due to internal politics and conflicts - the delay was being welcomed by the small players like Quip as there was not enough competition for these businesses in the mobile office market. Microsoft has undergone some small but important changes in its Office program and the iPad Variant does not exactly look like the old one. Also, the company has made changes with respect to pricing.

Office for iPad

Microsoft has made some key changes in its traditional Office in order to cater to the iPad Market which makes it worth the wait. First, the app is a combination of three Office programs (Word, Excel and PowerPoint), which are the most used among the traditional Office. As Microsoft is entering this market after some delays. There were fears that the company might have to play catch up. However, it looks like Microsoft might be able to capture larger market share in less time than expected. The main reason is the improved features of the product - Office for iPad very smartly utilizes the extra space in tablet. The touch overcomes the need to use arrow keys repeatedly, giving it a user friendly interface.

In addition, this app can be used both in portrait and landscape mode depending on the user's requirements. Many features are the same as traditional Office. This would make the app familiar to old office users while giving them the ease of use and new features at the same time. Microsoft faced some troubles with Windows 8 when the company took out the start menu - some users adapted to the new look while some had trouble navigating through the change. The company has decided to keep things simple with Office so that the transition is easy for users.

In addition, the company has also taken a step forward in cloud storage. All the data which is updated in the Office iPad is automatically updated on cloud storage so that the same file could be accessed by the desktop or the tablet. This service has also been provided by one of the smaller competitors, Quip. We think Microsoft has a better chance of fighting for its market share now with all these features incorporated into its product.

Market Potential

Unlike the traditional Office license for longer term, Microsoft has made a clever move in the pricing of this app. The company has incorporated a subscription plan for $7 per month. Without the subscription, the app could still function as a document reader. However, in order the make any changes to it or create a new document, users need to subscribe. The company is also offering a student package for $80, which covers a four-year subscription.

The market for iPad has been growing rapidly and this year the number of iPad users is expected to increase well above 60 million. Considering the $7 subscription charge, this is a market worth over $5 billion in annual revenues. Of course, not all of the iPad users will subscribe to Office but the market still has considerable potential. The student package shows that Microsoft is inclined to cater to different segments of the market and would make adjustments as it moves forward with this app.

Microsoft has ignored this segment for quite some time now. However, we believe there is still a considerable potential in this market. The company will benefit from its position among desktop office users - most of the users would like to continue their work on the same app if they are working on the go. As a result, there will be a substantial increase in revenues for Microsoft from this segment.

Conclusion

The company has entered the market after months of waiting. However, it looks like the wait was worth it as the app is impressive and has the potential to capture a substantial share of the market. The tablet market itself is growing rapidly which would also benefit the company in this area. We have maintained a moderately bullish stance on Microsoft as we believe there is some hidden potential in the company and the direction of the leadership over the next twelve months will be key in pushing this stock up.

Source: Microsoft: Another Step In The Right Direction?