Microsoft (Nasdaq: MSFT) Stock at 14-Year High, Mobile Success Would Send It Higher

Microsoft Corp. (Nasdaq: MSFT) stock reached its highest price since 2000 today (Tuesday) following reports that the tech company will release a version of its "Office" software for Apple Inc.'s (Nasdaq: AAPL) iPad.

In morning trading, MSFT touched $39.90 per share. That was a 5% increase from yesterday's close.

Nasdaq: MSFTReuters reported on Monday that Microsoft's new chief executive officer, Satya Nadella, will announce an Office app for iPad on March 27. The app will be part of Microsoft's new "mobile first, cloud first" strategy.

The same report, which cited anonymous sources close to the situation, says that Microsoft has had an Office app ready for the iPad and iPhone for several months.

Office is Microsoft's most profitable product, and a mobile app could bring huge revenue gains for Microsoft.

"We estimate that if 10% of the iPad install base were to subscribe to Office then this could add 15 million subscribers and generate $1.1 billion to $1.5 billion in consumer Office subscription revenue per year," said Bernstein Research Analyst Mark Moerdler.

Curiously, Microsoft has resisted bringing its Office software suite to Apple and Google Inc.'s (Nasdaq: GOOG) Android mobile devices - two major players in the mobile space. To date, Office has only been available on computers and Microsoft smartphones.

That has allowed Google and Apple to both cut into Microsoft's market with competing software products. In 2013, Apple offered free upgrades for life for its iWork software, which closely resembles Office. Google now offers Office competitor "Google Drive" on its mobile devices.

While Microsoft may be late to the game with its mobile Office software, the potential payoff from finally releasing the app should be huge...

Mobile App's Impact on Microsoft (Nasdaq: MSFT) Stock

Microsoft shares haven't broken $40 in 14 years, and yesterday's news was the catalyst MSFT needed to approach those dot-com era highs.

MSFT stock has been building momentum over the past 12 months, up more than 40% in that time.

Depending on how Microsoft's app fares in the mobile space, the stock could continue higher.

Rick Sherlund of Nomura Equity Research has a "Buy" rating on MSFT stock and has set a price target of $45 for the tech giant.

"We expect new CEO Satya Nadella to introduce this as a directional step in repositioning Microsoft to a mobile first/cloud first company," Sherlund told investors.

"We 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," Sherlund continued.

Nadella took over the reins at Microsoft on Feb. 4, 2014, and has continued to stress the importance of the mobile industry. The motto "mobile first, cloud first" has been repeatedly used by Nadella when describing the company's forward strategy.

Offering a mobile app for Microsoft's most lucrative product would be a natural step if the company truly wants to capitalize on mobile. It may be late to the game, but an Office app on iPhone, iPad, and Android will be a Microsoft cash cow for the foreseeable future.

Are you a Microsoft shareholder? What do you think of Microsoft's mobile strategy? Share your thoughts on Twitter @moneymorning using #Microsoft.

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