Microsoft will forgo serious revenue if it doesn't launch a full-blown version of Office for the iPad -- an estimated $2.5 billion a year, according to a Morgan Stanley analyst. Even though the math is wrong, don't be surprised to eventually see Office for the iPad, no matter what Steve Ballmer has recently said.
Fortune reports that $2.5 billion estimate from Morgan Stanley's Adam Holt. I don't buy the number -- and I'll explain why later in the blog -- but it's wortwhile seeing how he gets there. He claims that 30% to 40% of Mac users install Office, and so assumes that 30% of iPad users would install Office on their iPads if a full-blown version were available.
Here's how he then arrives at the $2.5 billion, according to Fortune:
Assuming a similar 30% attach rate in 2014 on roughly 200 million iPads at an average selling price of $60 comes to more than $2.5 billion in extra revenue per year, even after Apple takes its 30% cut off the top.
Fortune then reports that he said, "The math is compelling, and may drive MSFT to move Office."
The math, though, is wrong. Microsoft is no longer interested in selling single-user versions of Office, and is instead pushing subscriptions to Office 365. With a subscription, you can put Office on up to five different devices for $100 a year. Many people with iPads who want Office will likely have already subscribed for their PCs or Macs. So you can't count on $60 in revenue for each version of Office on iPads -- a good deal of money will have already been spent on a subscription,
Still, a fair number of people may be pushed into subscribing to Office because of iPad availability. And quite a few people may end up buying a single-user version of Office for the iPad as well. So there's no doubt Office for the iPad will be a big money-driver, but not to the tune of $2.5 billion a year. In addition, it will help fend off competition from Google Apps.
Steve Ballmer has hinted that Microsoft won't release a version of Office for the iPad any time soon. He's hinted that because there's a Web-based version of Office, there's no need to develop an iPad Office app. When asked by Reuters about the progress of such an app, he said:
"We do have a way for people always to get to Office through the browser, which is very important. And we'll see what we see in the future."
Given that an Office app for the iPad could help sell subscriptions to Office, I expect that we'll eventually see one, no matter what Ballmer told Reuters. It's just not clear when that might be.