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Why did Apple collaborate with Microsoft for Office on the iPad?

Puneet Sikka

Microsoft finally launches its long-awaited Office for the iPad (Part 2 of 4)

(Continued from Part 1)

Historically, Microsoft and Apple have been competitors

In the previous article of this series, we discussed how Microsoft (MSFT) plans to increase its presence in the cloud services market by introducing Office on Apple’s (AAPL) iPad. Here, we’ll discuss Apple’s motivation for its move to collaborate with Microsoft. Historically, Apple and Microsoft have been competitors, primarily in the PC operating system market. Microsoft had managed to win this battle in terms of share of the PC operating system market, but when it comes to profitability, Apple has always won the battle. Apple believes in selling quality products at premium prices, which is why it doesn’t concentrate on winning market share, but rather on profitability.

Shift from PCs to mobile devices has started to happen

According to Gartner, the PC market will see a decline from 299,342 unit sales in 2013 to 268,491 unit sales in 2015, while the tablets and mobile phone market will continue to grow. Mobile phone market is about six times bigger than the PC market currently, and this ratio will continue to increase. Even the tablet market will overtake the PC market by 2015.

This shift makes Google the main competitor to Apple

This trend shift has deep implications. We can conclude that the PC market will continue to lose importance, and so the main competitor for Apple isn’t Microsoft, but Google (GOOG). According to IDC, Google is the dominant player in the smartphone operating system market. Android’s market share is close to 80%. Apple’s iOS is a distant second with a market share of 15%, Microsoft is a distant third with a share of 3.3%, and BlackBerry’s (BBRY) share is less than 2%. Although Microsoft acquired Nokia’s (NOK) mobile division a few months back, it may not make much difference to Microsoft’s position in the smartphone OS market.

So it completely makes sense for Apple to collaborate with Microsoft to compete effectively with Google. In the next part of this series, we’ll discuss how Microsoft stands to gain from its collaboration with Apple.

Continue to Part 3

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