Armed with a $900 million argument, an analyst raised the Office-on-iPad banner, saying that the flop of the Surface RT gives Microsoft a chance to make billions in lemonade from its lemon.
"Protecting Windows RT by keeping Office off of Apple's iPad and Android tablets isn't working," said JP Gownder, a Forrester principal analyst. "It's instead creating risk for Office as users find other ways of getting things done."
Gownder tied last week's $900 million write-down of the Surface RT by Microsoft to a renewed call for the company to sell its ubiquitous productivity suite on rivals' tablets.
"The biggest asset Windows RT has is actually based on an app that Microsoft hasn't released - Office for Apple's iPad," Gownder said, referring to the operating system that powers the Surface RT. Windows RT bundles Office Home & Student 2013 RT, which includes touch-based versions of Excel, OneNote, PowerPoint and Word that run in a special 'desktop' mode.
Outlook will join that roster this fall when Microsoft ships Windows 8.1 for RT.
Gownder's unsolicited advice to Microsoft wasn't out of the blue; a horde of analysts and pundits have called on the company to pull the trigger on Office for tablets powered by Apple's iOS or Google's Android.
But last week's $900 million write-down, which Microsoft said was to cover steep discounts and excess inventory, was the proof that the compnay's Windows RT/Surface RT pitch had fallen on deaf ears.
In turn, that made Microsoft's presumed strategy of withholding Office from other tablet platforms indefensible.
But Gownder, like other analysts before him, also pointed out that Microsoft may have already missed an opportunity. "Microsoft's problem is that workers and consumers are already exceptionally productive with their tablets. And there's a hidden danger of holding out on Office for iPad and Android tablets - competitors tend to fill the gap and users establish different habits," Gownder said.
He cited examples, including Apple's iWork - which Apple will take to the web later this year - Google's Quickoffice, Evernote and other mobile apps that users have taken up in the absence of Office.
Gownder contended that Microsoft could recoup its Surface RT losses, and make more besides, if it offered Office on iPad. "If 10% of the 140 million iPad owners bought Office for $99.99, Microsoft would earn $1.4 billion in top line revenue, or $500 million more than the Windows RT write-down last quarter," he said.
Gownder may have based his math on the $100 annual subscription price for Office 365 Home Premium, the consumer-grade Office rent-not-buy plan. Assuming Microsoft does deliver Office for the iPad and Android tablets, it will most likely follow the same strategy it used last month for Office Mobile on the iPhone, requiring a valid Office 365 account to run the app.
Others have recently called on Microsoft to focus less on Windows and more on other parts of its portfolio, including Office, in light of last week's 6% decline in Windows Division revenue, the $900 million Surface RT charge and the continued slide in PC shipments.
"Documents remain essential and ubiquitous to all of the world outside of Silicon Valley," noted Ben Thompson, until earlier this month a partner marketing manager in Microsoft's Windows app team. Thompson now writes on his Stratechery website. "An independent Office division should be delivering experiences on every meaningful platform. Office 365 is a great start that would be even better with a version for iPad."
In Microsoft's recent corporate reorganisation, however, Office will not be an independent division - it is, more or less, in the current structure - but will instead be within the new Applications and Services Engineering Group, which will include Office, Microsoft's Bing search engine and Skype.
The company may well decide to continue resisting the potential of new Office revenue to keep Windows afloat. In the quarter that ended June 30, the Microsoft Business Division (MBD), whose biggest money maker is Office, recorded revenue of $6.43 billion, 1.7% more than the same period the year before, largely on sales to enterprises and in the face of a dismal quarter in PC shipments.
Microsoft may think the at-hand revenue is the smarter choice than more money accompanied by the risk of damaging Windows 8's tablet chances. But that would be a mistake.
"By ceding ground to competing apps, Microsoft is encouraging users to investigate other platforms," Gownder said.