Microsoft changes tack, makes its Office suite free on mobile
Few golden geese in technology have survived as long as Office has for Microsoft.
The suite of applications that includes Word, Excel and PowerPoint, first released in 1990, generated nearly a third of Microsoft's revenue during its last financial year - about $26 billion of $87 billion in total. By some estimates, the software accounted for an even higher portion of the company's gross profits.
But in a sign of the seismic changes underway in the tech industry, Microsoft, the world's largest software company, said on Thursday that it would give away a comprehensive mobile edition of Office. The free software for iPads, iPhones and Android tablets will do the most essential things people normally do with the computer versions of the product.
Just a few years ago, giving away a full free version of Office would have earned a Microsoft chief executive a visit from a witch doctor. Now, the move is following through on the rallying cry coming from Satya Nadella, Microsoft's new chief executive, who has pushed cloud and mobile computing as lodestars for the company's future.
The old Microsoft hemmed and hawed about creating Office apps for mobile platforms from Google and Apple, pushing its Windows platform instead. But the centre of gravity in the tech industry has quickly shifted to mobile and cloud computing. And the company's about-face comes after rivals like Apple and Google and many of the most successful new start-ups offered free software, often with premium perks for sale.
"Lots of consumers don't need a PC," said Rick Sherlund, an analyst at Nomura Securities. "They just need an internet connection. They don't need Office as much."
That reality has started to weigh on Office. While sales of the software to businesses grew about 8 per cent last year, consumer revenue rose only 2 per cent. Sales declined by double-digit percentage points during the first two quarters of the year.
The Office business suffered in recent years from a global slump in sales of PCs, which were hurt as people began to do more and more basic computing chores on tablets and smartphones. For years, Office was not available on mobile devices, and many consumers began to wonder whether they needed the software at all.
Those who needed productivity apps turned to free or cheap alternatives from Apple, Google and start-ups like Evernote. The outlook for Microsoft's apps has improved in recent quarters with the growth of Office 365, a cloud version of the product that includes constantly updated apps, unlimited online file storage and free Skype calling to traditional phones. Consumers pay $7 to $10 a month for the service, rather than buying a copy of Office for about $150.
"We'd like to dramatically increase the number of people trying Office," John Case, corporate vice president of Office marketing at Microsoft, said about the new offering. "This is about widening the funnel."
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Microsoft changes tack, makes its Office suite free on mobile