Microsoft's announcement last week that it will "include" four Office apps with Windows on ARM has analysts parsing the news like intelligence agencies that once tried to figure out what went on inside the Kremlin by poring over photos of who stood where on the Red Square reviewing stand.
Some analysts say that Office will be bundled along with Windows on ARM (WOA) sans a separate price tag. Others believe Microsoft would never give away one of its most precious possessions.
All acknowledged that Microsoft has not provided enough information, and that details may not emerge until just weeks before the company wraps up development.
Microsoft, meanwhile, declined to answer questions about Office apps on WOA, or to clarify what Steven Sinofsky, the head of the Windows group, meant in an 8,600-word missive published last week.
"What we know is that there will be some level of capability to those Office apps, but what we don't know is who pays for it," said Al Hilwa, an analyst with IDC who was briefed by Microsoft last week.
Hilwa and fellow IDC analyst Al Gillen interpreted Microsoft's announcement as confirming that the Office apps included with WOA -- touch-enabled versions of Word, Excel, PowerPoint and OneNote that run in the operating system's limited desktop mode -- would be bundled with the operating system, free to users.
At least some users.
"They're claiming it's a full version of Office, but that's it's a 'consumer version,'" said Michael Silver of Gartner, who was also briefed by Microsoft. "But we're not sure what that means."
Some, including influential blogger Mary Jo Foley, who put forward a trio of theories Monday , have speculated that the Office apps included with WOA will be analogous to Office Starter 10 , the ad-supported, bare-bones edition bundled on many new PCs. Microsoft essentially gives away Office Starter 2010 in the hope that it will convince some users to buy "up" to a full-priced version.
Or will Word, Excel and friends simply be upgraded editions of the Office Web Apps the company already offers free of charge?
No one knows, analysts said, and that has them weighing words.
Silver for one, asked Microsoft straight out whether the Office apps represented a WOA Starter. "They kept saying it was a full version of Office, not a Starter edition," Silver said. But he also noted that even that denial gives Microsoft room to maneuver: They could simply label it something other than "Starter" but still use that as a model.
"What they wouldn't say is how they're going to monetize it," Silver added.
While experts like Hilwa and Silver inferred that the Office apps on WOA would be free, others came to a different conclusion.
"I can't see them giving it away, Office is too important a product," said Paul DeGroot, formerly an analyst with Directions on Microsoft, now a principal with Pica Communications, a consulting firm that specializes in deciphering Microsoft's licensing practices.
"Microsoft can't afford to give away that licensing revenue stream," said DeGroot. "They may do that at some point, but it's too early."
He was referring to Office's contribution to Microsoft's bottom line: Last quarter, the division responsible for Office accounted for 30% of Microsoft's revenue and 52% of all operating income.
And there's the rub, said analysts, for by giving Office away as part of WOA, the company may be on a slippery slope that puts its cash cow at risk.
"Office is the most expensive component of the average business PC," said DeGroot. "If I'm going to save $200 on every device by not licensing Office, I could use that money to fund a different way of doing business."
Because of the revenue risk, analysts believe that Microsoft must make money in some way, perhaps by charging OEMs a higher price for WOA, thus raising the cost of tablets or cutting into makers' thin margins, or by charging only some customers. How they may do that is anyone's guess.
DeGroot speculated that Microsoft may require businesses to purchase additional Office licenses to use WOA-powered tablets to connect to corporate data centers and networks. "In licensing, the devil is in the details," DeGroot said, noting that Microsoft could use existing Enterprise Agreements (EA), the umbrella term for the licensing plans it offers large companies, to require WAO tablets to be tied to an additional Office license.
Others see the Office giveaway as a calculated risk, that bundling Office will boost the appeal of WOA tablets but not dramatically erode the suite's revenue.
"This looks like an aggressive intent to do managed cannibalization," said Hilwa, talking about the possibly free apps' impact on Office sales. "How much cannibalization there will be depends on what features they decide to include in these [Office] apps, how they monetize it through OEMs, and how they position these WOA tablets in the enterprise space compared to the consumer space."
And if the erosion is significant, it will not be all bad news for Microsoft. "To the extent [WOA tablets] are able to eat into Office income, then it implies that WOA is a great success," Hilwa argued.
DeGroot was more concerned about the impact.
"They're between a rock and a hard place," he said. "This is another effort by Microsoft trying to find a compromise that will let them grow the installed base by having a successful product on ARM, and still maintain their revenue. Eventually, all monopolies come to an end. Microsoft is being challenged by a new technology and form factor that they haven't had an answer for."
Questions -- lots of questions -- remain, but eventually Microsoft will have to clarify the Office with WOA deal, although not any time soon. "The pricing and licensing [of a new product] are always the last things they reveal," said Michael Cherry of Directions on Microsoft.
Silver doesn't expect to get the full story until just weeks before WOA goes RTM, or "Release to Manufacturing," the milestone label that describes when code is completed and ready to hand off to OEMs for inclusion on devices.
"It is very possible that a lot of the details haven't been ironed out yet, and that they're still working on the exact licensing policy vis-a-vie enterprises and the features to be included [in the WOA Office apps] for the consumer market," Hilwa said.
Or those details are already set, but the dearth of answers are just part of Microsoft's attempt to emulate the secrecy popularized by rival Apple.
"They're only putting out the information that they feel is necessary to get out the message that WOA is an integrated environment," said Hilwa. "They had to respond to the discussion around the value of the platform because they're now trying to attract developers, who have to decide whether to support it or not before actual devices are on the market."
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer , or subscribe to Gregg's RSS feed . His e-mail address is [email protected] .
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