Office for iPad Is Microsoft Corporation's Best Move in Years

Why Microsoft's move to get friendly with Apple is excellent news for investors.

Apr 1, 2014 at 7:15PM

Microsoft (NASDAQ:MSFT) is marching to the beat of a different drum these days. The new rhythm was officially unveiled when the company's new CEO took stage on March 27 to announce that its Office productivity suite was finally available for Apple's (NASDAQ:AAPL) iPad. While the move, in and of itself, may only have a small impact on Microsoft's bottom line, it signaled that the software giant is finally embracing the multi-platform approach it will need to succeed in a fragmented mobile environment.

Office Ipad Excel
Excel for iPad. Source: Microsoft Office official blog.

The strategic shift
"Microsoft is focused on delivering the cloud for everyone, on every device. It's a unique approach that centers on people -- enabling the devices you love, work with the services you love, and in a way that works for IT and developers," said Microsoft's new CEO Satya Nadella in a press release detailing Office for iPad last week. The new CEO's tone is receiving a warm welcome from investors. The stock is up 2% since the announcement.

With Office for iPad, the company demonstrated how serious it is about this new strategy.

Office for iPad apps have a familiar look and feel that are unmistakably Office but are built from the ground up for iPad, factoring in the unique nature of touch and functionality native to iPad along with what people most commonly want to do on a tablet.

Microsoft looks poised to do whatever it takes to bring its software to customers in a way that is convenient for them. In fact, Microsoft is even paying Apple a 30% cut of all $100 Office 365 subscriptions made within the Office apps. Despite Apple getting a 30% cut, purchases made within the app will give users access to the Office suite on up to five tablets and five mobile devices by any compatible manufacturer. Of course, Apple won't get a cut of 365 subscriptions that are made outside of the app.

Word Office Ipad

Word for iPad. Source: Microsoft Office official blog.

Why a new way of doing business was necessary
Why did former Microsoft CEO Steve Ballmer refuse to release a version of Office for the iPad? While the initial reason may have been a sincere concern for the iPad's potential as a productivity-worthy device, subsequent updates to the iPad have made the tablet more than powerful enough. So, why has Microsoft persisted so stubbornly? It's likely Microsoft was simply attempting to use Office as a selling point for its Surface tablet. Further, offering Office for iOS would aid a competing operating system to Windows -- Ballmer's greatest love.

But given the Surface's disappointing traction in the market and the iPad's continued dominance among tablets, protecting Windows and Microsoft-branded hardware isn't a shareholder friendly strategy anymore. Accepting reality, Nadella is appropriately embracing a multi-platform focus that brings its best products and services to customers, no matter where they are.

Investors should be happy with the new strategy. Clearly showing that the company will now do whatever it takes to put the customer first, even if that means tearing down the walls it thought were protecting Windows, Microsoft is positioning its formidable cloud products and services for success. With Microsoft's addressable market expanding, business growth seems more likely today than it did in the guarded days of Ballmer.

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Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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.

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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."

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

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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.

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