Microsoft Corporation Could Be About to Kill the Surface Tablet

Microsoft's Surface has long lagged Apple's iPad sales. But if Microsoft does this, the Surface could be doomed.

Feb 16, 2014 at 3:45PM

Microsoft (NASDAQ:MSFT) could release a touch-based version of its Office software suite for Apple's (NASDAQ:AAPL) iPad before it's released on Microsoft's own Windows tablets, according to plugged-in Microsoft blogger Mary Jo Foley.

If that's the case, Microsoft could be about to deal a crippling blow to its Windows tablets, which have already vastly underperformed Apple's devices. With Office on the iPad, it's difficult to see how Surface and other tablets running Microsoft's operating system survive.

Selling the Surface
Microsoft has run several different TV ads for its Surface tablets, and though they vary significantly, all of them contain the same phrase: "It has Office."

The inclusion of Microsoft Office has been a key selling point for Microsoft's devices, including the Surface and other tablets running the full version of Windows 8. Compared with Apple's iPads, Windows tablets have far fewer apps -- in fact, the Windows app store is so far behind Apple's iTunes, it's difficult to even compare them.

In that regard, it's not surprising that Windows tablets have struggled. Last year, Microsoft took a $900 million writedown on the Surface tablet, after the device sold worse than Microsoft had anticipated. Surface sales have improved but are still nowhere close to the 26 million iPads Apple sold last quarter.

Other companies have tried their hand with Windows-based tablets but haven't found much success, either. Research firm IDC concluded last year that Windows tablets continue to struggle.

Getting rid of its only selling point
Releasing Office on the iPad would shift the balance even more in Apple's favor. Not only can it access a library of hundreds of thousands of iPad-exclusive mobile apps, but it can also run Microsoft's Office. Why would anyone in his right mind still buy the Surface?

They wouldn't. Unless they can't live without a built-in USB port, there simply wouldn't be any reason to purchase Microsoft's tablet over Apple's superior alternative. Although I wouldn't expect Microsoft to explicitly kill the Surface tablet, releasing Office for the iPad would do exactly that.

The Office juggernaut
That said, even if it kills Microsoft's tablet efforts, Office for the iPad could be a boon to the company's shareholders. Last year, Morgan Stanley analysts argued that releasing Office for the iPad could bring in billions of dollars in additional revenue.

There's clearly a demand for Office among iPad owners -- consider all the copycat alternatives that have sprung up on Apple's app store. Even Apple itself, perhaps sensing an opportunity, made its own competitor, iWork, free for iPad owners last year.

Office remains deeply ingrained among corporate workers, making its downfall highly unlikely. Still, the longer Microsoft goes without releasing Office for the iPad, the higher odds become that a true alternative to Office emerges. Given how important Office is to Microsoft (accounting for around a third of its revenue and more than half of its profit), porting it to Apple's iPad seems like the right move for shareholders -- but don't be surprised if Surface doesn't survive.

A better investment than Microsoft? Get our top stock pick for 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 owns shares of Apple 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