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Microsoft: Trying to Gain Investor Confidence with Its Latest Move

April 21, 2014 | About:
mitu

mitu77

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Microsoft (MSFT) now eyes the $7 billion market by providing MS-Office (MS-Excel, MS-word and Powerpoint) for iPad users as declared by the newly elected CEO of Microsoft. Now if this is achievable or not is yet to be seen, or it’s just a over optimistic announcement made by the CEO just to make an impact of new presence. The newly appointed CEO has to prove its position by improving the balance sheet left by Steve Ballmer. Steve Ballmer’s tenure witnessed a growth of revenue from $25 billion to $70 billion. This certainly has an assignment for newly elected CEO to impress the investors.

Whether Satya Nadella can take Microsoft to new heights is yet to be seen, but the achievement of $7 billion in revenue by providing free download of Office tools on iPad can be a rough journey ahead to achieve this target. The free download of tools provides read-only mode for the documents, editing will require paid subscription of Office 365, this is where a $7 billion market is anticipated.

Another point that makes one wonder is that the iPad was released in 2010 and four years down the line, Microsoft has realized its potential, or is it too late and Microsoft has missed the bus. If the company is relying on iPad to boost its revenue, it should be noted that iPad sales have been flat last year and are also losing the grip of the tablet market globally with many Android based tablets available with more flexibility and cheaper prices.

Microsoft plans to release office 365 for iPad with added on features like new mobile productivity apps — Word, Excel and PowerPoint. Licensing policy is yet to be known but could be same as office for iPhone, which was released last summer. As per the licensing policy of Microsoft Office Personal, individual price of $6.99 per month or $69.99 per year for a single PC or Mac and 1 Tablet to be connected to the service. The multi-user price tag is $9.99 per month or $99.99 per year for 5PC and 5 smartphones.

If the service is charged, it would be approximately be 20 percent penetration in an iPad install base of 250 million units. The license charges at $5 per month could generate $3 billion in subscription revenue per year. Theoretically this looks achievable but reality may sound different.

The CEO is confident that Microsoft's Cloud for Mobile would address the needs of individuals and organizations spanning through various devices. On the contrary, investors and the market feel that he should allocate more resources for data analytics as Microsoft is behind in this multi-billion dollar market.

Companies like Oracle and IBM are serious about this segment of the market to positively influence revenues. As per IDC, Microsoft has surpassed IBM in the global database market, so Microsoft should further consider to scale up its revenue from multiple solutions.

Conclusion

The new CEO seems to have the vision of understanding the business application, and the online market with reliance on cloud can be encouraging for Microsoft as it did lag in this area, and the introduction of Office for the iPad is a move in the right direction.


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