Please ensure Javascript is enabled for purposes of website accessibility

Will Apple Make iWork Free on New Macs?

By Daniel Sparks - Sep 15, 2013 at 10:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's free on iCloud. And now it will be free on iOS. But what about on OS X?

iWork. Source:

First, iWork was free on iCloud, and now it's free on iOS, too. But there's one crucial component missing to Apple's software-bundling value proposition: What about free iWork on new Macs?

The case for bundling
Apple's iWork consists of Pages, Keynote, and Numbers. It's the equivalent of Microsoft's (MSFT -0.26%) Word, PowerPoint, and Excel, respectively. Currently Apple's first-party productivity suite retails for a total of $60 on Apple's Mac App Store. With the suite now free on both iCloud and iOS, there's little reason for Apple to continue selling the suite for a profit.

"Office is the gold standard and iWork is a minuscule fraction of the market," fellow Fool Evan Niu explained. With that said, Apple may be better off using the mediocre suite as a small perk to inspire hardware sales -- where Apple makes the majority of its Mac-related revenue anyway.

A tiny portion of Apple's business
Apple's iTunes, software, and services segment accounts for just 11.3% of Apple's revenue in the third quarter. Of course sales of Apple's iWork suite represent only a fraction of this segment's total revenue.

Apple's iWork software, therefore, contributes only a small portion to Apple's business. On that note, it's very possible that a decision to bundle iWork on Macs could provide an outsized gain in hardware revenue despite a loss in first-party software revenue. The company has already rationalized the benefit to make the move on iOS. Is free iWork on Mac next?

A final justification
To illustrate the paltry significance of Apple's iWork suite, compare it with Microsoft's business division, its segment related to sales of Microsoft Office. In the company's most recent quarter, the segment reported an operating profit of $7.2 billion for the division. According to Horace Dediu's estimates, Apple's first-party software likely contributed just $3.6 billion in revenue for the entire year of 2012.

As Evan said just a few months ago, Apple could easily make iWork free on OS X "while putting a little bit of pressure on Google and Microsoft at the same time."

Do you know the major developments that could crush Apple? The secrets to success that could make investors like you rich? The answers are simpler than you think, and The Motley Fool is sharing them in a free report titled "5 Secrets to Apple's Future." Inside, we outline critical information every Apple investor must know, so click here now for your free report.

Fool contributor Daniel Sparks owns shares of Apple. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$174.55 (0.88%) $1.52
Microsoft Corporation Stock Quote
Microsoft Corporation
$291.32 (-0.26%) $0.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.