It's unfair that Microsoft (NASDAQ:MSFT) is viewed as old, stodgy, and behind the times. This is a well-diversified company that generated more than $22 billion in free cash flow over the past 12 months and has nearly $60 billion in net cash in the bank. And the only thing investors can get excited about is Office on the iPad?

OK, it sort of makes sense
Just as the market made a big deal about Apple's (NASDAQ:AAPL) then-impending China Mobile (NYSE:CHL) deal, it's making noise about the alleged upcoming release of Office for iOS devices. Microsoft stock is up about $3.50 a share following the leak, adding roughly $29 billion in market capitalization, but does the renewed enthusiasm for the stock really make sense?

Well, yes and no. From a revenue standpoint, Office for iOS probably won't move the needle. After all, iPads already come with the free iWork suite, and who really thinks iPad users are dying to do some light document or spreadsheet editing on their tablets?

Now, one could simply argue that users are going to buy iPads if they want iPads, regardless of whether they can get Office, so in that sense, this is a net win for Microsoft. But the problem -- one that's been pretty clear for a while now -- is that as devices with non-Windows operating systems, such as iOS and Android, become more powerful and flexible, the moat that Microsoft has built around its own operating system in the consumer space begins to shrink. Bringing Office to the iPad would further serve to shrink that moat.

Things would be a little different if Apple were to offer a "convertible" iOS device like an iPad Pro. That would either cannibalize a MacBook sale, which would have meant Office revenue for Microsoft anyway, or weaken the value proposition of hardware -- especially tablets -- with Windows pre-loaded. But as of now, that's not part of the equation.

So why is the stock price up?
The real reason Microsoft's shares are up on this "news" -- and the reason it could stay up until we get confirmation -- is that it shows a fundamental flexibility at Microsoft. The company would come out looking like a shareholder-oriented business that will do whatever makes financial and strategic sense. If that means shrinking the Windows moat to strengthen its Office business, then so be it.

This has very little to do with the potential financial impact of Office for iOS, and everything to do with how investors perceive Microsoft. The company has been growing its top and bottom lines for years now, yet the stock hasn't been given much love, particularly as investors and the financial media alike seem to have confused Microsoft for a company that didn't already sport a $300 billion-plus market capitalization.

Microsoft, like Apple and so many other "big tech" names, is simply mature, and while the market may be optimistic about great, bold new things from new CEO Satya Nadella, it really is hard to move the needle on a company that pulls in more than $80 billion a year in revenue. Only the perception around Microsoft, the free-cash-flow giant, has changed. The strong underlying fundamentals were already there.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple and owns shares of Apple, China Mobile, 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.

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