In one of the worst-kept secrets in years, Microsoft (MSFT 0.54%) finally released Office for the iPad. On the surface, this would seem to be a big deal for Microsoft and should help the company. However, this move could actually hurt both Microsoft and Google (GOOG +1.24%), while giving Apple (AAPL +2.66%) a boost.
A game changer, but not in the way you think
In theory, Office for iPad changes the game for Office 365. Microsoft's subscription service becomes more valuable, as there are millions of iPad users who can now use the real Office programs on their iPads. Within days of the release, Word, Excel, and PowerPoint jumped into the top free iPad apps on iTunes.
Source: iTunes
Though the online versions of Office worked for iPad users, these versions were handicapped by the lack of an app and missing features. But bringing Office to the iPad makes Microsoft's Surface product lineup somewhat less appealing.
This is one of the unintended consequences of Office for the iPad. At $449, the Surface RT with Office offers nearly 50% more weight and far fewer compatible apps than an iPad Air for $499. Given the huge difference in apps, weight, and screen quality, this extra $50 is likely money well spent for prospective buyers. The fact that Office is now on the iPad also makes the Surface Pro at $899 a much harder sell.
Given that Microsoft reported an increase in Surface sales of more than 120% in the last quarter, Office for the iPad might actually hurt future sales growth in this key category for the company.
A 30% cut for iTunes? Don't get your hopes up
When Office for the iPad was introduced, some surely saw that Apple would get a 30% cut of any Office 365 subscription sold through the iTunes store. However, Apple fans should be more excited about increased iPad sales than increased iTunes revenue.
There are already millions of users who have paid for their Office 365 subscription before Office for iPad was introduced. While these apps are great news for existing customers, this generates nothing in terms of Apple revenue. In addition, Apple already generates billions from iTunes each quarter, and these sales grew by 19% in the last quarter.
Google, in a similar way, generates more than $1 billion in revenue from its Google "Other" division, and this revenue -- including Google Play -- increased by nearly 100 year over year%. However, with Office for Android already readily available, no one is making big projections of growth from Google's cut of Office sales. It makes far more sense that Apple would get a boost from increased iPad sales as users now can use the same program on their iPad, Mac, or PC.
A perfect picture of the gap between iPad and Android tablets
Maybe the biggest irony of the Office for iPad introduction is the challenge this presents for Android tablet sales. Though Google's Android OS has been gaining ground on iOS in the tablet space, there is still a huge separation in the quality of tablet-optimized apps for Android versus iOS.
If a picture is worth a thousand words, look at the difference between Office for Android and Office for iPad.
Office for Android (Word)
Office for iPad (Word)
Office for Android (Excel)
Office for iPad (Excel)
(Source: Google Play and iTunes)
Since Android dominates the smartphone operating system wars, many apps are designed to work best on the smaller screen of a phone instead of a tablet. Office for iPad might be the best example of how big of a difference there is between iOS and Android tablet apps.
The bottom line: Office for iPad is great for customers and should be good news for Microsoft's Office business. However, Apple may benefit just as much from the capability to get real work done on the iPad. In addition, Google better figure out a way to get tablet-optimized apps on board.
Android may dominate the smartphone OS war, but consumers are going to be clamoring for real tablet apps. Office for iPad may be the apps that push more customers toward the iPad rather than an Android or Surface tablet. I bet that's not what Microsoft was expecting, but it's likely what will happen.
