Is Microsoft Helping to Sell iPads to Businesses?

Microsoft Office is the dominant productivity software in enterprise, and the iPad, the dominant tablet. Redmond's decision to provide Office apps for the iPad have just cemented the hold that Office and the iPad have in business.

Apr 2, 2014 at 11:35AM

Microsoft (NASDAQ:MSFT) Office is the dominant productivity software for business. Meanwhile, Apple's  (NASDAQ:AAPL) iPad owns the business tablet space.

This dynamic is leading to a strange, symbiotic relationship between the two products. With the release of free Office apps for iPad, Microsoft finds itself leveraging the popularity of the iPad to protect the company's enterprise business. And if Microsoft's new Office strategy is successful, Apple is likely to sell even more iPads in the enterprise space.

Why does Microsoft need the iPad?
The rapid adoption of tablets by businesses and consumers, combined with the weakness in PC sales, has the folks in Redmond rethinking their software business model. Specifically, Apple's decision to make its iWork suite of productivity software free is pushing down the price Microsoft can charge consumers for its Office software. Meanwhile, Microsoft Office's business customers increasingly need an enterprise solution for their rapidly growing inventory of tablets.

Three bullets points highlight Microsoft's dilemma:

  • Microsoft is increasingly dependent on the enterprise market for revenue growth.
  • Weak adoption of the Microsoft Surface tablet puts Office enterprise licensing revenues at risk.
  • With a 91% share of enterprise, an Office app on the iPad has become Microsoft's best option in protecting its Office enterprise business. 

The changing Microsoft Office environment 
Microsoft's consumer licensing business, representing 22% of company revenue, languished in the second quarter of 2014, down 6% from last year. Microsoft also indicated in the company's second-quarter earnings report that it expects consumer revenue will remain under pressure as a result of continuing weakness in PC sales.

Weakness in consumer licensing revenue places even more importance on the company's commercial licensing segment, which now accounts for 41% of company revenue. Microsoft was able to grow its enterprise business 8% in the second quarter of this year, despite reduced licensing fees resulting from the migration of businesses to the Office 365 subscription model.

Initially, Microsoft's tablet strategy kept Office exclusive to the company's Surface tablet in the hopes Office popularity would drive business adoption. Recent earnings results show the strategy has had very limited success. While Surface revenue doubled to $893 million in the latest quarter, Microsoft's share of the tablet market remains in the single digits.

Meanwhile, the Surface tablet business continues to lose money for the company. Given the marginal share of the Surface, Redmond needed a way to quickly get its Office software into the tablet space. The solution: making free Office apps available in the Apple app store. Office apps are free to download and can be used to view Word, Excel, and PowerPoint files. However, users need to have a paid subscription to Office 365 to make changes to Office files.

Android tablet adoption is weak in business
Despite high overall tablet market share, Google's (NASDAQ:GOOGL) Android operating system has seen limited adoption in the enterprise market. A significant number of Android tablet manufacturers continue to target the low-end consumer market with low-priced, underpowered machines. IDC analyst Ryan Reith, in an AppleInsider interview, described these tablets as "kids tablets."

The result is a smaller number of Android tablets suitable for business applications than the market share numbers would indicate. Meanwhile, business app development problems resulting from Android fragmentation are holding back business adoption of high-end Android tablets.

Foolish takeaway
The iPad's dominance in business and Microsoft's increasing focus on growing its enterprise business appears to be creating a symbiotic relationship for the two products. At the time of writing, Microsoft's Word, Excel, and PowerPoint apps held the top three spots in the Apple App Store's free iPad app list.

Microsoft's ability to leverage the popularity of its Office iPad apps could provide the edge the company needs to maintain its dominance in the enterprise market. Office success on the iPad could also provide Apple with an advantage in the enterprise space that Android may not be able to overcome.

Investors should keep a close eye on Microsoft's ability to tie commercial Office 365 subscriptions to the "free" iPad Office apps. If the strategy works, it will be good news to both Microsoft and Apple investors.

Time to get in on the biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.


Bill Shamblin owns shares of Apple and Google. 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.

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

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, 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