Ballmer's exit revives demands for Office on iPad, Android tablets

'One of those classic moments' when Microsoft must decide what's more important: Office revenue or supporting a sagging Windows ecosystem, says Forrester analyst

Microsoft CEO Steve Ballmer's announcement last week that he will step aside in the next 12 months has renewed calls by analysts that the company offer Office on Apple's iPad and tablets powered by Google's Android.

"You're hearing these calls now because there's a perception, rooted in some reality, that Ballmer was the one who claimed Office as part of the platform wars," explained J.P. Gownder, a principal analyst at Cambridge, Mass.-based Forrester Research.

"This is really a good time to renew the call for Office on iOS and Android tablets," said Gownder. "It's clearly the best product in its class, and this is one of those classic moments where Microsoft could keep that momentum, where they can seize the day on platforms that show no sign of slowing."

Most experts believe that Microsoft has withheld Office from rivals' tablets as a strategic move to protect Windows and the tablets that it and its OEM partners sell. Windows RT, the scaled-down version of Windows 8 that powers the Surface RT, Microsoft's beleaguered tablet, comes with Office. And the legacy version of the suite, Office 2013, is a big part of Microsoft's marketing of its own Surface Pro, as it is for OEMs that produce Windows 8 tablets.

Giving iPad and Android tablet owners a chance to run a touch-based Office would, the theory goes, diminish the already slim chance that Windows tablets can catch up with Apple and the swarm of Asian tablet makers who have turned to Android.

But outsiders have continued to counter that Microsoft's decision was, and still is, shortsighted. They have argued that Microsoft is stifling Office's revenue potential in order to support a sagging Windows ecosystem.

"The Office franchise is exposed to erosion as non-Windows mobile devices take productivity work away from Windows PCs and mobile devices," said Al Hilwa, an analyst with IDC, in a guest post on GeekWire Monday.

Like Gownder, Hilwa called for Microsoft to let Office compete in the marketplace because the strategy of subordinating the suite to Windows' goals wasn't working. And with Ballmer on his way out, his objections may not carry any weight.

"Microsoft has to rethink its vision of the dominance of Windows in the mobile world and adjust to the reality that it will be at best one of several major players in future devices and will never have the control it did in the pre-touch era," Hilwa said.

In a follow-up email reply to questions today, Hilwa elaborated. "Keeping the benefits of Office for Windows can in theory strengthen Windows, but if there are other things wrong with Windows that are stalling adoption, Office may not have an impact," Hilwa said. "And every month that passes without [Office] being available on other tablets will witness some theoretical erosion of Office's indispensability."

Office is a major money maker for Microsoft, more so than Windows. In the quarter that ended June 30, when the company was still organized by product divisions, Microsoft Business Division (MBD), the unit responsible for Office, generated $7.2 billion in revenue, or 36.3% of the company's total.

The Windows group, meanwhile, produced $4.4 billion in revenue, or 22.2% of the total for the quarter. Sales of the Surface tablets, which generated just $853 million from October 2012 to June 2013, were included in the Windows division's earnings.

Microsoft's corporate reorganization, which Ballmer announced last month and until he suddenly announced his retirement last week was to execute, doesn't give any clues as to whether the company would backtrack from its no-Office-on-iPad decision.

"There was no indication that the company was willing to change its long-standing philosophy of protecting its children," IDC analyst Al Gillen wrote of the reorganization in a Friday note restricted to clients.

Whether Ballmer's departure makes a difference in the Office debate within Microsoft is also hard to determine, Gownder acknowledged. Like other analysts trying to predict Microsoft's next moves, he said it may not be resolved until a new CEO is in place.

"This really gets to the philosophical decision that the board has to make, about what kind of person they're going to put in," said Gownder. A new CEO from outside the ranks may be more likely to disrupt the current strategy, and let Office loose, he said.

But Gownder and others argued that Microsoft doesn't have time to waste, and thus no time to wait until a new CEO is appointed: Office alternatives are available and each day Microsoft delays offering the suite on iOS and Android, the stronger those become and the less important Office will be to users.

In lieu of a new CEO, Gownder said, the board could call the shot. "I think the board would have to be involved," said Gownder of any decision to offer Office on iOS and Android. "It would have to be a strategic decision."

Microsoft's board of directors is already under pressure to do just that. In April, activist investor Jeffrey Ubben, the CEO of ValueAct Capital, took a $2 billion stake in Microsoft and began agitating for a seat on the company's board. At an investor conference, Ubben said Microsoft should make Office more widely available on non-Windows platforms.

Some reports have linked Ballmer's retirement to the board's attempts to fend off Ubben.

The board, however, may resist and stick to Ballmer's strategy of bolstering Windows with Office. "Unless Windows is fixed, offering Office on iPad will increase [the iPad's] adoption in the enterprise, and that is something Microsoft does not want to contribute to," noted Hilwa in his Tuesday email. "There is definitely brinkmanship being played here, but my point is that it is probably wiser in the long run to ship products as they become available, and move forward fast."

Microsoft has shipped Office for Apple's iPhone and Android smartphones, tying both apps to Office 365, the company's "rent-not-buy" software subscription model. But as experts have pointed out, there's a big difference between availability on a smartphone, where document editing is nigh impossible, and on tablets, which are much more conducive to content creation.

Gownder has estimated that Microsoft could generate $1.4 billion annually from Office on the iPad, assuming just 10% of the 140 million iPad owners ponied up $100 a year for Office 365.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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