March 28, 2013, 3:51 PM — Microsoft could rake in more than $1 billion in revenue in the first year after launching Office for Apple's iOS and Google's Android platforms, an analyst said today.
Gerry Purdy, principal of MobileTrax, did a back-of-the-envelope calculation with several assumptions to arrive at the $1.25 billion, then added that with tablet shipments doubling this year, Microsoft could squeeze as much as $6 billion annually from mobile down the road.
"These are rough estimates," Purdy acknowledged in an interview today. "But this is an issue because the numbers are getting so big with the iPad and Android tablets that Microsoft can't continue to ignore it."
Purdy came to his $1.25 billion estimate in the first year by assuming that 25% of iOS and Android tablet users would buy Office, that the net to Microsoft would be $50 per copy, and that iOS and Android tablets are selling at a clip of approximately 100 million units annually.
According to a recent forecast by IDC, total tablet sales in 2012 exceeded 128 million, and should top 190 million this year, virtually all of them powered by either iOS or Android. If IDC's prediction is on the mark, this year's number world nearly equal the estimated 194 million PC and Mac notebooks expected to ship in 2013, but fall well short of the total personal computer market -- notebook plus desktops -- of 336 million.
Unlike other analysts, who believe that Microsoft will tie an eventual mobile Office to its Office 365 subscription plans, Purdy believes that Microsoft will sell Office rather than include it as part of a software rental deal.
But that means Microsoft would have to give up revenue to its Apple. The Cupertino, Calif. rival controls the iOS App Store, the sole distribution channel for iPhone and iPad apps, and takes a 30% cut of all sales.
To come away with $50 net from each copy of Office on the iPad, Microsoft would have to charge around $70, more than double the combined price of Apple's three iOS productivity apps of Pages, Numbers and Keynote.
The company could, however, deal Office for Android itself: Google does not demand that all apps go through its Google Play e-market.
The $1.25 billion could grow to as much as $6 billion annually, Purdy said, citing a higher uptake rate of 40% and tablet shipments of 300 million.
That 300 million figure is in the cards, IDC said this week, pegging global tablet shipments in 2017 at 352 million. The 40% of owners who buy into Office could be explained as well if one assumes that as tablets mature, more are used as one-for-one replacements for notebooks to create content, and fewer strictly as personal computer companions utilized only for content consumption.