By Trefis.comMicrosoft ( MSFT), which competes with Google ( GOOG) and IBM ( IBM) in the productivity software market, is speculated to be developing a smartphone-compatible version of its well-known Office productivity software (Excel, Word, PowerPoint). Microsoft, which offers office suite licenses for PCs, already offers a complete offering of its Office products on its own smartphone operating system (Windows Mobile 6.5) and is expected to do so with Windows Phone 7 OS as well. At the rate smartphone use is growing, the installed base of smartphones will eventually exceed that of PCs. We believe that Microsoft may be looking to make Office compatible with all smartphones to position itself favorably for the large smartphone market. Office Constitutes About 31% of Microsoft's stock Microsoft's Office Suite is a group of desktop applications that includes word processing, spreadsheet preparation, presentations and email. Office is primarily used by businesses to improve the productivity of office workers. We estimate that the Microsoft's Office business line (including Microsoft Dynamics) constitutes around 31% of the $32 Trefis price estimate for Microsoft's stock. Office on Smartphones We estimate that the total market for the productivity software licenses in 2009 was around 265 million, and we expect this to increase to around 360 million by the end of Trefis forecast period. Traditionally, this license market size has been driven by the number of global office workers using such productivity software on PCs. We expect that future growth of this market will be driven in part by demand for Office products on smartphones.
Business adoption of smartphones is increasing at a fast rate due to increasing needs for employees to be accessible at all the times. Employees are using smartphones to access work documents (often as e-mail attachments) without depending on a PC.
15% Upside to Trefis Estimate for MicrosoftAccording to Gartner, the installed base of smartphones is expected to be around 1.32 billion compared to the PC installed base of 1.78 billion by 2013. Gartner also predicts that the total mobile phone installed base (smartphones and feature phones) will be around 1.82 billion and hence will exceed the PC installed base by 2013. We expect that the smartphone installed base will exceed the PC installed base before 2020. At one extreme, if we consider that all the businesses providing Microsoft Office to their PC-based office workers might also make Office available on the smartphones of those workers, that could mean a significant jump (about double) in demand for Microsoft Office licenses. This analysis assumes that licenses for use on PCs and smartphones would be sold separately, which may not be the case; however, the scenario illustrates a potential upside of about 15% to the $32 Trefis price estimate for Microsoft's stock if the addressable market for Microsoft Office licenses were to reach about 720 million licenses by the end of the Trefis forecast period instead of the 360 million licenses that we forecast. You can see the complete $32 Trefis Price estimate for Microsoft's stock here.