At a news conference Thursday, executives demonstrated a new
"touch-first" version of Office crafted for the iPad, available for
download as a free app, though a subscription is needed to let users
create or edit documents rather than just read them.
Significantly, they did not demonstrate any software on Windows
machines, telegraphing a departure from former Chief Executive Steve
Ballmer's focus on the personal computer operating software and its
"Their absence speaks volumes," said Daniel Ives, an analyst at FBR
Capital Markets. "Nadella's a cloud-centric guy; he's going to focus
on what's been successful, and where the future's going. Windows 8
thus far has been extremely underwhelming."
Nadella kicked off the presentation with a fluid, low-key
introduction to Microsoft's approach to the new mobile,
cloud-centric world of computing, in his first public appearance
since taking the helm 52 days ago.
Dressed in a black polo shirt and dark jeans, the 46-year-old
computer scientist threw in some geek humor and lines of poetry from
T.S. Eliot, marking a change in style from his energetic predecessor
Steve Ballmer. His lack of references to Windows indicated a deeper
Nadella gave no indication of when Microsoft would release
"touch-first" versions of Office apps for Windows 8, the latest
version of the operating software, which he acknowledged had fallen
behind in the mobile era.
"The Windows strategy, there's no change, except we want to be known
as the innovative company that's coming from behind in some
categories," Nadella told reporters in an ad hoc question and answer
session after the presentation, another sign of new openness at the
"If you look at the story of Windows, we lead in some, we have
fallen behind in some. We're grounded in that reality," he said.
"What we need to be is a challenger there and be able to show what
we're capable of doing in these new form factors."
Apart from the absence of any Windows devices, the Surface, one of
Ballmer's prized concepts, was conspicuously missing from a show
floor at the event that included Google Inc Android tablets from
Samsung and Acer as well as the iPad. Nadella did not mention the
poor-selling tablet at all in conversations with reporters.
OFFICE, AT LAST
The Office apps are free to download from Apple's app store, but to
create new documents, users will need a subscription to Microsoft's
existing cloud-based service called Office 365.
Microsoft's Office 365 Home Premium, designed for home consumers,
costs $100 a year. For businesses it costs $60 or more per year,
depending on features.
Apple gets its standard 30 percent cut of new Office 365 Home
subscriptions sold through its app store, but no share of existing
Office 365 revenue or multiple subscriptions bought by companies.
That is analogous to the way Apple treats magazine subscriptions.
"Welcome to the #iPad and @AppStore!" Apple Chief Executive Officer
Tim Cook tweeted after the announcement. "Thanks @tim_cook, excited
to bring the magic of @Office to iPad customers," Nadella tweeted
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Analysts have estimated that Microsoft could rake in anywhere from
$840 million to $6.7 billion a year in revenue from iPad-native
Office, although some fear it may have moved too late to grab the
attention of many.
Easy to use, touch-friendly work apps like Haiku Deck, Quip,
Smartsheet and Evernote, not to mention Google Apps, have quickly
gained a following among younger users who have never worked with
Office applications, or relish the change.
Sources have said an iPad-friendly version of Office — which
encompasses such popular applications as Word, Excel and PowerPoint — had been ready for years, but the Redmond, Washington-based
company had been reluctant to compromise its signature PC operating
system. At the time, the sources could not speak because they were
not authorized to talk to the press.
However, Microsoft's own efforts to produce a touch-friendly
operating system capable of challenging the iPad have floundered,
with poor sales of its Surface tablet, and a general lack of
interest from third party hardware makers in making tablets running
Nadella's willingness to break with the Windows tradition, which
remains co-founder Bill Gates' most enduring legacy, helped spur
Microsoft shares to $40-plus levels not seen since the dotcom boom
Wall Street is now guardedly optimistic on a company that, while
still garnering billions of dollars in annual profit, risks gradual
obsolescence in a mobile-powered tech industry.
To some investors, steering a new course for such a massive entity — Microsoft is the second-largest U.S. tech company by market value — is a daunting task. Before Nadella's appointment, some investors had
hoped for an outsider open to change to take the reins.
But bold moves with Office, and signifying a renewed drive to
conquer the mobile arena and "cloud" computing after years of
shackling its best products to PC-centric Windows, are seen as a
"He talks the talk," said Ives at FBR, referring to Nadella. "Now
the big question is, will he walk the walk?"
(Reporting by Gerry Shih and Bill Rigby in Seattle;
Bernard Orr and Richard Chang)
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