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Will Apple Make iWork Free on New Macs?

iWork. Source:

First, iWork was free on iCloud, and now it's free on iOS, too. But there's one crucial component missing to Apple's software-bundling value proposition: What about free iWork on new Macs?

The case for bundling
Apple's iWork consists of Pages, Keynote, and Numbers. It's the equivalent of Microsoft's (NASDAQ: MSFT  ) Word, PowerPoint, and Excel, respectively. Currently Apple's first-party productivity suite retails for a total of $60 on Apple's Mac App Store. With the suite now free on both iCloud and iOS, there's little reason for Apple to continue selling the suite for a profit.

"Office is the gold standard and iWork is a minuscule fraction of the market," fellow Fool Evan Niu explained. With that said, Apple may be better off using the mediocre suite as a small perk to inspire hardware sales -- where Apple makes the majority of its Mac-related revenue anyway.

A tiny portion of Apple's business
Apple's iTunes, software, and services segment accounts for just 11.3% of Apple's revenue in the third quarter. Of course sales of Apple's iWork suite represent only a fraction of this segment's total revenue.

Apple's iWork software, therefore, contributes only a small portion to Apple's business. On that note, it's very possible that a decision to bundle iWork on Macs could provide an outsized gain in hardware revenue despite a loss in first-party software revenue. The company has already rationalized the benefit to make the move on iOS. Is free iWork on Mac next?

A final justification
To illustrate the paltry significance of Apple's iWork suite, compare it with Microsoft's business division, its segment related to sales of Microsoft Office. In the company's most recent quarter, the segment reported an operating profit of $7.2 billion for the division. According to Horace Dediu's estimates, Apple's first-party software likely contributed just $3.6 billion in revenue for the entire year of 2012.

As Evan said just a few months ago, Apple could easily make iWork free on OS X "while putting a little bit of pressure on Google and Microsoft at the same time."

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 15, 2013, at 10:16 PM, mdl00 wrote:

    Apple is proving that iOS devices are not just for consumption, but for creation - that's likely why iOS iWork is free. No reason I can think of to do the same on the Mac.

  • Report this Comment On September 16, 2013, at 7:35 AM, jdmeck wrote:

    They are much more full featured than the iOS versions, but they might. I don't see it making any difference in sales or profit.

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