Microsoft shares closed at $39.55 today, up nearly 4 percent — reaching their highest point in 14 years following reports that the company will unveil a version of the Office suite for Apple’s iPad next week as part a broader strategy shift under new CEO Satya Nadella.
Here’s the question: Will the move to further embrace platforms that compete with Windows be good for Microsoft’s business overall?
The new Office for iPad could boost Microsoft Office 365 subscriptions, which would be required to use the apps, contributing to Microsoft’s revenue. But in a note to clients this morning, Nomura analyst Rick Sherlund said the change could reduce the demand for Software Assurance, the volume licensing deals that Microsoft strikes with large businesses.
However, investors seem to be more interested in the long-term potential of the strategy.
Sherlund writes, “The upcoming announcement will likely be more beneficial to the stock than to earnings if much of the incremental demand comes at the expense of Software Assurance, but investors are likely to welcome the directional shift in the business to non-PC and non-Windows platforms and a stated direction which we would expect to emphasize a mobile and cloud first strategy.”
Steve Ballmer must be scratching his head over this one. Microsoft’s share price is now higher than it was for the bulk of Ballmer’s tenure as CEO. The irony is that Microsoft actually signaled its intent to release Office for iPad while Ballmer was still CEO, albeit somewhat vaguely. Microsoft’s leadership change, and the fact that the unveiling is now imminent, has apparently grabbed the attention of the market.
At least Ballmer still benefits from his position as a major Microsoft shareholder.