Microsoft's Cash Cow Heading To The App Slaughterhouse?

Reuters Business Video Report - REUTERS REPORTER, JON GORDON:

"Mobile for Microsoft so far hasn't exactly been a success story."

Effectively shut out of the smartphone operating system market by Apple and Google's Android, the software giant has responded by pushing hard into tablets with the costly and poorly-received Surface, and then an even more expensive buyout of Nokia's struggling handset business.

Now Microsoft's sacred cash cow - the Office suite - is facing its own mobile-driven crisis.If you want to edit an excel or a doc file on mobile, there's an app for it - but it probably isn't built by Microsoft.

It's most likely Polaris, an Office suite replacement developed by little-known South Korean firm Infraware.

Thanks to pre-install deals with mobile makers Samsung, LG and HTC as well as cheap pricing on theApple store, it's spread like wildfire.

Worse for Microsoft, Infraware chief executive Kwak Min-cheol's next plan:

CHIEF EXECUTIVE OF SOUTH KOREA'S INFRAWARE INC, KWAK MIN-CHEOL:

"What we're trying to do is add cloud-based services and make the Polaris app seamlessly accessible through multiple devices. Then offer it for free."

That broadens the ecosystem they are targeting from just mobile devices to cloud-based syncing on actual desktops, putting it on a collision course with Microsoft's next-gen Office 365.

Costing about 10 bucks a month, that service from Microsoft is its fastest-growing product ever.

CHIEF EXECUTIVE OF SOUTH KOREA'S INFRAWARE INC, KWAK MIN-CHEOL:

"If you look at Microsoft, they earn over $13.8 billion dollars with Office products, and they charge monthly usage fees. Ours has great compatibility with Office and it will come for free with many devices. I'm pretty confident this will have a major destructive impact on the market."

Infraware's market cap is just over 250 million U.S. dollars, a far cry from Microsoft which weighs in at 274 billion with a "b".

And while they may be inflicting some pain on microsoft in terms of pricing and the business model, Polaris remains mostly a consumer play.

REUTERS REPORTER, JON GORDON:

"To have a real destructive impact as the CEO suggests, Infraware will have to win over more of Microsoft's corporate customers, who make up the vast majority of those Office revenues."