A recent announcement by new Microsoft (NASDAQ:MSFT) CEO Satya Nadella that the company will offer its Microsoft Office product for the Apple (NASDAQ:AAPL) iPad has the potential to be a big win-win for investors of both tech giants. Microsoft currently offers Office for the iPhone, but the product will be much easier to use when viewed on a bigger screen.
Apple CEO, Tim Cook, tweeted a thanks to his counterpart at Microsoft, and for good reason. More cash could flow to Cupertino as the result of increased iPad sales, especially in the business-to-business category.
Apple is looking at a growth slowdown if the domestic market for its primary cash cow, the iPhone, saturates, or if its foray into China doesn't catch on. The company is looking for potential new outlets and would love to get more of a toe hold in IT departments of big corporations, which are generally moving away from desktops and into mobile devices.
Scratching the Surface
Microsoft opted to offer Office on the iPad before its own tablet. Sales of the Surface have been anemic, to say the least. While Apple has sold about 190 million iPads since 2010, Microsoft has barely dented the market. Only around 1.5 million have been sold to date and the company has garnered just a 2% market share and is probably losing money on the product. Microsoft has seen the light -- offer a best-selling software application for a best-selling hardware device, and do it with Apple.
Cash from the cloud
Office for iPad will be stored in the cloud, and users will pay a monthly fee to be able to create and edit documents through Microsoft's existing Office 365 service. Apple will get a 30% cut of the pie, too. It could be the gift that keeps on giving for both companies.
Nadella has hinted that Microsoft would focus more on the cloud, and appears to be keeping to his word with this latest announcement.
Review and outlook
Office for iPad has a lot of neat features. Users can dictate notes or letters, and the text will automatically be inserted into a Word document. Although videos cannot currently be embedded into PowerPoint, based upon Microsoft's standard operating procedure that will probably be available at a later date. Users love when new things are added, and it could mean future growth in the space.
Will Microsoft collaborate with Apple on other "projects?" The old Microsoft, under former CEO Bill Gates, and Steve Ballmer clashed frequently with the Apple led by the late Steve Jobs. The new regimes at both companies may be willing to work together and jointly profit.
Microsoft announced that its very popular Office program will be available on the iPad. Apple investors can also benefit as cash rolls in from subscription fees and tablet sales. This could be just what the doctor ordered for both tech giants.