Today is a special day for Microsoft (Nasdaq: MSFT), as the software giant releases the 2010 editions of Office, SharePoint, Visio, and Project to businesses worldwide. The consumer version of Mr. Softy's popular Office 2010 productivity suite will hit the market next month. But before the folks in Redmond celebrate, they might want to brace for a potential reality check.
A lot is riding on these software updates, particularly Office 2010. This division was a real killjoy during Microsoft's latest quarter. Windows 7 saved the day, as Windows-related revenue accounted for $967 million of the $855 million in consolidated improvement on the top line. In other words, Microsoft's 6% uptick in revenue would have turned negative without Windows.
The company is no slouch in server software, and its Xbox division is coming around, especially now that Netflix (Nasdaq: NFLX) streaming has turned the console into a home-theater centerpiece. It's still losing money in cyberspace, though its search deal to provide results for Yahoo! (Nasdaq: YHOO) should pay off in the long run. At the end of the day, though, Microsoft needs strong performance from longtime workhorses Windows and Office to justify its $260 billion market cap.
Refreshing its productivity suite every few years is usually a good way for Microsoft to shake up new sales and drum up no-brainer upgrades. The new version offers more collaboration tools and easier graphics implementation. Those features alone might not be enough to move the masses to the new platform, but at least Mr. Softy's trying. However, it may be trying in vain to outrace an oncoming trend tornado.
We're just beginning to enter an age of cloud computing. Rudimentary word processing and spreadsheets no longer require software packages with three-figure price tags. Plenty of free web-based solutions will do the job just as well, spearheaded by Google (Nasdaq: GOOG) Apps and Oracle's (Nasdaq: ORCL) OpenOffice. The highest-grossing download for Apple's (Nasdaq: AAPL) iPad has been Pages -- the $9.99 program that makes it easy to peck out a document on the touchscreen tablet (or the keyboard accessory, when speed is essential).
Microsoft isn't clueless. It's addressing the cloud threat by offering web-based versions of Office 2010's programs. Mr. Softy already has 40 million paying customers for its Microsoft Online Services. However, it further plans to roll out scaled-back free consumer versions of its Office to compete with Google.
That strategy will fare poorly for Microsoft. It obviously can't make the freebie edition good enough to eat into premium sales. However, if it skimps on too many features in the free version, it will simply push casual users toward its cloud-based rivals.
In short, on this very special day, Microsoft has more to prove than ever.
Will web-based productivity suites ever surpass old-fashioned installable software? Share your thoughts in the comment box below.
