Microsoft has announced the availability of its Office suite on iPad and will now offer its mobile operating system to manufacturers for free, marking a shift in strategy as it seeks relevance in the mobile market. This acknowledgment of diminished market share indicates that the Office brand alone cannot drive tablet sales, as Microsoft’s computing sales have plummeted from 90% to below 20% in five years. These changes position Microsoft as a more viable competitor to Android in the mobile space, suggesting a pragmatic approach under new CEO Satya Nadella.

1. Microsoft Goes
Mobile
Ciaran Norris 3rd April 2014
Background
In a major effort to regain some sort of relevance in the increasingly duopolised world of smartphones
and tablets, Microsoft has recently made two major announcements. First it confirmed that its Office
suite of products is to become available on iPad and then said that it would be offering its mobile
operating system to device manufacturers free of charge, a change to its previous strategy of insisting
on payment.
Details/Implications
The lack of Office on iPad has seemed like a major missed opportunity for some time. However, in
contrast to when Bill Gates famously joined Steve Jobs on stage back in 1997 (via video link) to announce
that Microsoft had committed to releasing Office for Macs, this time it feels more like Apple is doing
Microsoft a favour (in 1997, Microsoft dwarfed Apple – now Apple’s income from iPhones alone exceeds
Microsoft’s total revenues). This is essentially an admission that products like Office are not enough of a
selling point for people to buy a Microsoft branded tablet and that tablets are likely to overtake laptops
as the primary domestic computing device.
To summarise, it has been estimated that Microsoft’s share of personal computing sales (devices sold
that include its software) has fallen from around 90% to less than 20% in the last 5 years.
That figure also explains the other announcement, that Microsoft’s mobile operating systems will now be
available to device manufacturers for free (on devices with screen sizes smaller than 9”). Because of
Microsoft’s success in squeezing patent licensing payments out of companies that use Android, it will
now make more money out of Android phones than Windows ones. It will also make Windows a cheaper
option (free) than Android (not always free). At the same time it has reduced some of the hardware
requirements for its mobile systems making it even easier for its OS to be used on lower-cost
smartphones.
In most markets, Android is winning the smart-phone battle (at least from a share point of view, Apple’s
profitability is much higher) though all of the Android tablets haven’t really hit iPad’s dominance in
tablets. These two developments position Micrtosoft much better in both categories: making the mobile
OS free means Microsoft becomes a real alternative to Android in the fastest growing device category
globally, whilst Office for iPad means Microsoft could now stand to gain from Apple’s continuing
dominance in this area. Although traditional PC sales are declining, there can be no doubt that many
businesses still rely on Office and this means that many more of them are likely to continue to buy it.
Summary
A number of Microsoft’s decisions in the final days of Steve Ballmer’s reign as CEO raised eyebrows
(buying Nokia, previously the only real adopter of Windows Mobile was one) but these two
announcements suggest that new CEO Satya Nadella may have a more pragmatic view of the company’s
future. Whilst the thought of having to create apps for three mobile operating systems isn’t one most
brands would welcome, competition is always to be welcomed. There may finally be a third horse in the
mobile race.