Microsoft (MSFT) Office for iPad an Important Directional Step - Nomura's Sherlund

March 18, 2014 9:56 AM EDT
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Shares of Microsoft (NASDAQ: MSFT) are seeing notable strength early Tuesday (+2.5%) as investors react positively to the upcoming unveiling of Office for iPad and other touch devices on March 27.

Commenting on the news, Nomura Securities analyst Rick Sherlund views this as "directionally positive in driving demand for the Office 365 subscription business and in moving the company to faster growth non-Windows and non-PC platforms." He added, "More broadly, we expect new CEO Satya Nadella to introduce this as a directional step in repositioning Microsoft to a mobile first/cloud first company."

Sherlund expects Office for the iPad may initially be limited to Word, Excel, PowerPoint and OneNote and likely out before the Windows 8.1 version. He notes no word on the timing of the Android tablet version, which Mr. Ballmer referred to at last September’s analyst meeting.

"To put this in perspective, it is clearly a directional or strategic benefit to Microsoft that the company is moving Office beyond PC's and Windows to faster-growth platforms and cloud services. The incremental revenue benefit is something that requires some analysis," Sherlund said.

The analyst would expect Microsoft to announce that users of Office 365 (the subscription based service) can access the touch first versions of Office (iPad, Windows 8.1 devices and Android tablets) as an additional platform service for no additional charge. "This is likely to increase interest in Commercial Office 365 and the Home Premium version and additional cloud based services," he said.

The firm maintained a Buy rating and price target of $45 on Microsoft.

For an analyst ratings summary and ratings history on Microsoft click here. For more ratings news on Microsoft click here.

Shares of Microsoft closed at $38.05 yesterday.

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