How Apple and Google Can Destroy Microsoft's Office Business

Apple and Google could a big step forward in challenging Microsoft's Office business next year.

Jan 4, 2014 at 2:00PM

Analysts have long criticized Microsoft's (NASDAQ:MSFT) failure to release its Office software suite for rival mobile platforms, notably Apple's (NASDAQ:AAPL) iPad and tablets powered by Google's (NASDAQ:GOOGL) Android. Morgan Stanley analysts argued last year that by not releasing a native iPad Office app, Microsoft was losing out on billions in potential sales.

But soon it could be much more than that. Apple and Google have been working hard to improve their rival Office applications (iWork and Apps, respectively), and a new wave of devices debuting in 2014 could soon give them the edge over Microsoft's Office.

Microsoft has used Office to sell Windows
Perhaps in an effort to keep its operating system relevant, Microsoft has tied Office to Windows. If you want full Office on your tablet, you'll have to buy one running Windows 8. Microsoft uses this as a key selling point in nearly all of its advertisements for the Surface and other Windows tablets.

Admittedly, subscribers to Microsoft's Office 365 cloud service can access a stripped-down version of Office on their iPad, iPhone or Android smartphone, but it's quite limited compared to the Office you'd find on a Windows PC. The Verge, writing about the version of Office available to Android handset owners, remarked: "It's designed to simply be used for correction, formatting, and comments. Basic formatting ... options are supported, but beyond this it's rather limited."

Microsoft's tablet effort continues to struggle
But keeping Office confined to Windows tablets hasn't done much to boost sales. Microsoft took a $900 million writedown on Surface hardware last July, and even though it says sales have improved, Microsoft isn't selling anywhere near as many tablets as Apple. In October, research firm IDC said Windows tablets were still struggling.

Apple and Google come after Office
Meanwhile, Apple and Google are slowly positioning themselves to better compete with Office. Alongside the iPad Air announcement in October, Apple made iWork -- its Microsoft Office competitor -- free for all buyers of new iOS devices.

Google's alternative to Office, Google Apps, has always been free for consumers, while business users have to pay a modest fee. But unlike Apple, Google has been aggressively targeting business users, perhaps making Apps a far more menacing threat. Google's enterprise chief told AllThingsD that the company aimed to eventually steal 90% of Microsoft's Office customers. That hasn't happened yet, but Google continues to work on making Apps better -- most recently announcing a number of improvements to Google Sheets, its Excel competitor, in December.

The coming wave of large tablets
But as anyone who works in an office environment knows, Microsoft Office is well ingrained -- getting business users who may have relied on Office for the last 20 years to switch is no easy task. But that isn't to say it's impossible: One way to do it would be to replace Windows PCs with tablets; specifically, hybrid tablets -- larger iPads and Android tablets with bigger screens and keyboards better suited to office work.

Those devices look set to make their debut later this year. Apple has been rumored to be working on a 12- or 13- inch "iPad Pro" for months, and on Friday, analysts at Evercore Partners projected that this forthcoming, larger iPad will launch in the fall of 2014. Many businesses already use iPads in various capacities, and though a 9.7-inch screen is too tiny for productive work, 12- and 13-inch Ultrabooks are fairly common.

Google's hardware partners should follow suit; indeed, Samsung is widely believed to be working on a 12.2-inch "Galaxy Note Pro." If the devices catch on, similar-size Android tablets from LG, Sony and Hewlett-Packard, among others, should be expected.

Will Microsoft's obsession with Windows 8 doom its Office business?
Microsoft's Office is nothing short of a juggernaut, and the real cash cow among Microsoft's various businesses: Back in July, Microsoft's last earnings report before its recent reorganization took effect, Microsoft's Business Division (composed mostly of Office) brought in more than one-third of its revenue and about $4.8 billion of its $6 billion quarterly profit.

But Microsoft's insistence on tying Office to its Windows tablets has given Google and Apple an opening -- and in 2014, it looks like they will try to capitalize on it. Enterprise-focused, larger tablets running iOS and Android are clearly a threat to Microsoft's Windows business, but paired with much improved Google Apps and Apple's iWork, could ultimately be far more damaging to Microsoft's Office.

Our top stock pick in 2014
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

 

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google and owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers