Putting Office exclusively on Windows tablets may be a costly mistake, says analyst
Microsoft’s Steve Balmer with Office for Surface
FORTUNE — Two and a half billion dollars.
Here how he gets that number.
For starters he estimates that Microsoft probably sold fewer than 1 million Windows-based tablets last year and will be hard pressed to capture 10% of the tablet market this year — especially with stalwart partners like Hewlett-Packard (HPQ) reportedly choosing Android over Windows 8 for its forthcoming mobile devices.
He also reports that three to four times as many Mac users (30-40%) install paid versions of Office on their machines as Windows PC users (10-15%) do — a difference that feels too high unless he’s not counting the discounted versions of Office Home edition that come bundled with new PCs.
Assuming a similar 30% attach rate in 2014 on roughly 200 million iPads at an average selling price of $60 comes to more than $2.5 billion in extra revenue per year, even after Apple takes its 30% cut off the top.
That’s more than Holt forecasts Microsoft will make from selling software (Windows and Office) on all Windows-based tablets in 2014.
“The math is compelling,” he concludes, “and may drive MSFT to move Office.”