Office 2010 was a huge hit and sold more than 100 million licenses. It showed an 8% increase in revenue last quarter, compensating for the lull in Windows sales. However, sales are expected to slow down considerably in 2012, as it becomes more than 2 years old. It recently launched Office 365, an on-demand, cloud based version of the Office Suite, in order to capture the growing cloud based productivity software market, in which Google Docs is emerging as a serious competitor. Office 365 sales have been picking up, but they are still too low compared to sales of Office 2010.
We expect Windows 8 sales to lift Microsoft’s revenues in 2012, followed by a further boost in 2013, with the launch of Office 15. Microsoft currently has a 94% share in the office productivity software market, which is expected to decline marginally over the forecast period, due to increasing competition from alternatives like Google Docs and Zoho Office.