Is Microsoft’s Stubbornness Becoming Too Costly?

Microsoft is failing to collect on billions of dollars annually as a direct result of the company’s unwillingness to quickly hash out a deal with Apple to deliver the full Office suite on the iPad.

Although Microsoft is presently giving a huge competitive advantage to its Surface tablet by offering the Office productivity suite, this reality has done little to diminish Apple’s dominance in the tablet space. So with Office being kept off of the iPad, Microsoft is reportedly losing billions of dollars in potential earnings annually. That’s according to Morgan Stanley analyst Adam Holt.

Holt figures that if Microsoft were to release Office for iOS, pricing it at $60, it could potentially sell it to roughly 30 percent of iPad users. Extend that to an installed base of 200 million iPads in 2014, and Holt concludes that Microsoft would generate about $2.5 billion in revenue per year on Office for iPad — less Apple’s App Store commission.

As John Paczkowski of All Things D logically explains in a new report Friday, it’s not like Microsoft doesn’t know what it’s missing out on in terms of revenue opportunities. “And it’s more likely than not that the company is very carefully weighing tradeoffs here,” Paczkowski says, “and trying to determine if keeping Office off iOS is a sufficient incentive for enterprise to use Surface and other Windows tablets.”

As best as we can tell, Microsoft hasn’t slammed the door shut on reaching a deal with Apple. But negotiations (and the revenue split with Apple to come from such a deal) obviously haven’t yet resulted in an option sweet enough for Microsoft’s liking – even while the software giant loses billions in potential earnings.

Should Microsoft capitulate and bring Office to the iPad? Please weigh in with thoughts or comments below.