Bill Gates swats the iPad, says Office will help Windows 8 tablets rule

The iPad may rule the roost today, but eventually Windows 8 tablets will succeed, in large part because they're built to run Office. So says Bill Gates, while also taking a backhand swipe at the iPad.

In a joint, wide-ranging interview with Warren Buffet on CNBC, Gates was asked about how Microsoft could succeed in a world in which tablets are becoming increasingly dominant and PC sales stagnant. He started his answer by touting Windows 8 as the solution, because it bridges the world of PCs and tablets:

"Windows 8 is revolutionary in that it takes the benefits of the tablet and the benefits of the if you have Surface and Surface Pro you've got that portability of the tablet but the richness in terms of the keyboard and Microsoft Office of the PC."

From there, he took a swipe at the market-leading iPad, and said that Windows 8 tablets will succeed because unlike the iPad, they are built to use Office, and include keyboards -- although he didn't mention that those keyboards cost extra. He said:

"It's going to be harder and harder to distinguish products, whether they are tablets or PCs. With Windows 8, Microsoft is trying to gain share in what has been dominated by the iPad type device. A lot of those users are frustrated. They can't type. They can't create documents. They don't have Office there. So we are providing them something with the benefits they have seen that have made that a big category without giving up what they expect in a PC."

Gates may have inadvertently given insider's information about Microsoft's plans about releasing Office for the iPad and Android tablets. There's been a great deal of speculation about that, with some analysts saying that if Microsoft released Office for them, it could eventually reap multiple billions of dollars in additional revenue. Gerry Purdy, principal of MobileTrax, estimates that Microsoft would gain get an additional $1.25 billion in revenue in the first year Microsoft releases iOS and Android versions of Office. The company would get $6 billion in annual revenue by 2017, he claims. And back in February, Morgan Stanley analyst Adam Holt estimated that Microsoft could get an additional $2.5 billion in Office revenue by releasing Office for iOS.

Those numbers are over-inflated, though, because they assume that Microsoft will sell standalone versions of Office for iOS and Android, and that they won't be included in Microsoft's Office 365 subscription service. Given that Microsoft views the future of Office as a subscription service for multiple devices, it's unlikely that Microsoft would release standalone versions. Still, Android and iOS versions of Office would be big revenue generators, because they would convince many users to buy the subscription version of Office.

A number of reports have said that Microsoft will hold off releasing a version of Office for iOS and Android until 2014. The reason is simple: The company wants to use Office as a way to get people to buy Windows 8 and Windows RT tablets. Gates saying that Office is a way for Microsoft to gain a competitive edge with its tablets is clearly in tune with that. So don't be surprised if there's no version of Office for iOS and Android released until next year or beyond.

I think that's a mistake. It's one more example of Microsoft hurting itself by hamstringing its divisions by forcing them to help Windows rather than compete openly. Window's isn't Microsoft's biggest money maker any more. The Office division outperforms it financially. Microsoft would be better served by turning its divisions loose instead of having them be hamstrung by Windows.

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