Microsoft Corporation Is Becoming Just Like Google Inc With Office for iPad

With the computing industry changing, Microsoft can't rely on Windows anymore.

Mar 31, 2014 at 7:30PM

Microsoft (NASDAQ:MSFT) is like Oprah of tech companies. It has tons of loot with close to $100 billion in cash and investments, and it's starting to give away stuff to its fans.

Earlier this month, Microsoft was mulling free upgrades to Windows 8.1 for Windows 7 users. Now, the company is offering its popular Office suite on Apple's (NASDAQ:AAPL) iPhone and Google (NASDAQ:GOOGL) Android phones free of charge.

New CEO Satya Nadella is shedding Microsoft's conservative ideology, recognizing that Windows shouldn't be the company's centerpiece in an era of declining PC sales. Nadella's Microsoft appears willing to sacrifice Windows revenue for the chance to welcome new and old users into its web services ecosystem.

Allow me to reintroduce myself
Microsoft is offering the Office apps, with full functionality, for free on smartphones. On the iPad, users will be limited to viewing documents, unless they pay $99 for an Office 365 subscription (of which Apple gets its 30% cut).

This is an interesting strategy for Microsoft as it hasn't been a fan of the freemium model in the past. Remember, this is the company that charges a licensing fee for its phone OS.

But if Microsoft charged a premium upfront, it could have trouble attracting an audience. Apple, with the release of the iPad Air and iPad mini with Retina, now includes its productivity apps pre-installed. Google gives away its cloud-based productivity suite to anyone who wants it. To get a chance at attracting the market, Microsoft has to give away its best product.

Microsoft understands its real competition
The Mac vs PC debate is so last decade.

Today, it's Apple vs Android, and Microsoft is just an afterthought. Microsoft's goal is to "drive Office 365 everywhere" as Nadella said at the Office for iPad launch. As the software becomes platform agnostic, Microsoft will need to prove to customers that Office is worth the premium.

That means its real competition is Google, which famously gives away its best products like Google Docs. It's not just productivity software that Microsoft is competing with Google. They're also battling it out in cloud computing, web search, and mobile devices. Microsoft has decidedly lost the battle for the latter, despite hoarding its popular product for its own mobile OSes.

The Surface has lagged in sales, forcing Microsoft to write down inventory on its first generation. Meanwhile, Windows Phone has made only a small dent in the smartphone market. If the plan was to use Office to attract consumers to its mobile platforms, (which seemed to be the case), it hasn't worked.

It can still win the cloud
The future of Microsoft and Windows is in the cloud, which is perhaps why Nadella, the former head of the cloud division, was tapped for CEO. Microsoft Azure relies on Windows servers, and Office 365 runs on the platform. By extending Office 365 to the iPad, Microsoft is increasing the potential audience for cloud computing (and Windows customers through clever accounting).

Microsoft already works with Apple, which runs much of its iCloud service on Azure. The extension of Office to the iPad is just a further concession that Microsoft needs to play nice with its one-time rival to win share outside of the tablet and PC markets -- particularly the cloud.

Staten and Forrester predict cloud computing will grow to a $40 billion industry in 2020, and both Google and are aggressively attacking the market. After a recent price-drop at Google, Amazon replied in kind just 24 hours later. Microsoft, meanwhile, has yet to respond, but it shouldn't be too far behind.

Microsoft -- the web services company
Microsoft is finally adapting to a new era of computing. Its Windows monopoly is eroding as more consumers elect to purchase iOS and Android devices over a new PC. With software available across multiple platforms Microsoft can't afford not to follow suit.

Microsoft has already made several indications that it's moving away from traditional Windows licensing fees to drive revenue and more toward web services like Bing, Azure, and Office 365. Office for iPad is just another step that moves Microsoft toward a web services company, much like Google.

Could this doom Microsoft? As Microsoft struggles in the cloud, the world's richest man trembles from this technology
There are few things that Bill Gates fears. Cloud computing is one of them. It’s a radical shift in technology that has early investors getting filthy rich, and we want you to join them. That’s why we are highlighting three companies that could make investors like you rich. You've likely only heard of one of them, so be sure to click here to watch this shocking video presentation!

Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information