A big story making the rounds is how Microsoft is losing billions due to the absence of Microsoft Office on the iPad. Yes, billions. Roughly 2.5 billion, in fact. This is from a note by Morgan Stanley's Adam Holt, who calculated the rate using a net revenue of $50-$70 per unit sold and a 30% adoption rate among iPad users.
The 30% adoption rate used in the calculation is drawn from the Microsoft Office adoption rate of Mac users. Windows users? Only around 11% purchase Microsoft Office.
The flaw in the logic: iPad users aren't Mac users.
If every iPad owner also owned a Mac, no doubt Apple would be quite happy. They'd also be the undisputed champ of PC sales. But this is far from the truth. In fact, Apple sold around 3.2 iPads for every Mac during their fiscal 2012. Even if every single Mac owner also owned an iPad, the vast majority of iPad owners would still be using Windows-based PCs. (Yeah, the same people with an 11% Microsoft Office adoption rate.)
Assigning Mac adoption rates to iPad users just because both are made by Apple makes about as much sense as assuming people who love lettuce also love spinach.
Among the other issues with this $2.5 billion dollar fiction:
- Not everyone uses their tablet like their PC.
- Microsoft would need to break Microsoft Office up into its individual products (Word, Excel, etc.) and sell it piecemeal. And not everyone would buy every product. Some might just need Word or Excel.
- Given the choice between Mac's office suite and Microsoft's twice-as-expensive suite, many people that just need light word processing or spreadsheet functionality may choose the cheaper alternative.
Even with an 8% adoption rate -- which might be a little more realistic -- Microsoft could make $600 million in revenues by releasing Office for the iPad. And more over time as the iPad market grows. More importantly, they ensure people continue using Microsoft Office as their office suite solution.
A disaster for Microsoft would be to ignore the iPad and have an organization like OpenOffice, which provides a free office suite for Mac and Windows, to provide an iPad solution and give people a compelling reason to go with a Microsoft Office alternative on both the tablet and the PC.