Microsoft's New Office Online Version - Analyst Blog


The world's largest software maker Microsoft Corp. ( MSFT ) is set to launch a redesigned online version of its Office software with touch controls, which users can access wherever there is an Internet connection.

Microsoft is offering Office 2013 at a $100 annual subscription which it has named 365 Home Premium. The idea is to offer an option to use the software on multiple devices. In the current market environment, where consumers are increasingly using smartphones, tablets and PCs, a single subscription catering to all is likely to go down well.

However, since the service is available only for up to five Windows devices or Apple's ( AAPL ) Mac computers and does not consider Apple's iPhone and iPad or devices running on Google's ( GOOG ) Android, a sales pickup is likely to be slow. Particularly since these devices are likely to remain a major chunk of the market in the foreseeable future. According to IDC, the Android OS accounted for 75% of 181.1 million smartphones shipped in the third quarter of 2012.

Microsoft's Office 365 is a subscription-based cloud software service. It was officially launched in 2011. The new Office comes with the traditional word processing, spreadsheets and email programs that can be purchased singly or in combination.

The data will be stored automatically in Microsoft's data centers and can be accessed through several devices. 

This is a radical move from its traditional approach of installing the Office software on a single system for a one-time payment to an online subscription service.

Microsoft's Office software is being deployed in the stores of retailers such as J. C. Penney Company Inc. ( JCP ) and U.K.-based retailer Tesco.

As per research conducted by IDC, cloud-based services may grow into a $100.0 billion market by 2016, representing a compound annual growth rate (CAGR) of 26.0%. Cloud services are expected to drive the growth in IT going forward, generating 41.0% of overall growth in IT by 2016. Thus, the strengthening of Microsoft's position in the segment is encouraging as the PC market is showing no signs of revival in the near future.

Microsoft reported revenue, excluding deferrals, of $21.46 billion in the second quarter of fiscal 2013, which was up 34.0% sequentially and 2.7% from last year, in line with our estimates. All except the Entertainment & Devices segment grew both sequentially and from the year-ago quarter. Entertainment & Devices were down year over year.

Microsoft has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , CAGR , GOOG , JCP , MSFT

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