You should believe Steve Ballmer
Microsoft's CEO is serious about reinventing the tech giant as a "devices and services" company -- the recent reorganization is for real. Today's launch of Office for Android can mean nothing else; okay, he wants to preserve revenues for the most profitable division, but the two objectives are intertwined.
Office for Android is a gutsy, risky move. Bets are on the table, and Ballmer puts his biggest stakes on one number. Google chief exec Larry Page sits opposite. Who wins the gamble? Is it winner takes all? Or will both take home booty? The answers are likely a fiscal year of earnings -- perhaps half-a-gin more -- away.
Just two months ago, I asserted: "Microsoft shouldn't do Office for Android", yet here it is -- Mobile Office for Office 365. But much has changed in a short time up in Redmond, Wash. I reasoned then:
Android is a risky bet. While Google's platform seemingly makes sense by the numbers of devices shipped versus iOS, the temptation to go there is fool's play. The transition from the personal computing to cloud-connected device eras is unmistakable. Google shifts computing and informational relevance to the cloud and drives it back to the device. Microsoft drives it the other way, leveraging off the huge Office customer base. The software giant seeks to provide customers seamless experience whether using applications on a PC, other devices or over the Internet, preserving the relevance of major products like Office. Google seeks to undermine them...Microsoft shouldn't help Android adoption by supporting its crown jewel there.
My reasoning stands if the old Microsoft prioritizes protecting Windows as a major operating system for the contextual cloud computing era -- what many people wrongly call post-PC. According to Gartner, Android device shipments will be more than three times Windows next year -- (1.06 billion and 378 million, respectively). Android arrives on most of the tech people actually buy, smartphones and tablets.
So far, Microsoft's efforts in both categories are dead on arrival. Today, colleague Wayne Williams reveals that Surface, for example, generated just $853 million in fiscal 2013, or less than this month's $900 million write-off that contributed to a Microsoft stock sell-off.
Neither Microsoft nor its partners have a competitive Windows tablet in the fastest growing category: tablets 7-7.9 inches. During second quarter, Android tablet market share surged to 67 percent from 51.4 percent a year earlier, while iOS fell to 28.3 percent from 47.2, according to Strategy Analytics. Windows share: 2.3 percent.
On smartphones, during the same time period, Microsoft's global market share is less than 5 percent in most markets, the United States among them, according to Kantar WorldPanel. The point: Microsoft already has lost the next-gen device platform war. Windows is a lost cause.
Worth Fighting For
Office remains, as does the recent push to cloud services around the suite and other existing software products. During fiscal 2013, Office division accounted for a stunning 60.5 percent of Microsoft profits. That's a revenue stream Ballmer should want to preserve at all costs, particularly if he is serious about devices -- on all platforms -- and services. In view of the recent reorganization, I reverse my position and assert that Microsoft should release Mobile Office for Android, as long as the focus is devices and services, which it is.
The product name "for Office 365" is the point, and the service is required. Like iOS, Android users get something, but not as much as those on Windows Phone. Microsoft's message here is subtle but direct: If you want Office on a mobile platform other than Windows Phone, you need the productivity suite subscription service. If you already have Office 365 and Android, Microsoft offers an extra benefit at no extra charge.
As I explained a year ago, Office 365 is the productivity suite's future. During fiscal 2013, the Business division generated $27.4 billion in revenue -- $1.5 billion from Office 365, a service less than 12 months released. That figure doesn't include ancillary software or services revenue connected to the subscription suite. If Microsoft doesn't find a place on those billion Android devices, Google will with Apps, and Business division declines.
Question for Android users: Will you now subscribe to Office 365?