Enterprise Agreements May Help Microsoft Sell Tablets

In an effort to gain back market share in the competition with Apple (NASDAQ:AAPL) and Google’s (NASDAQ:GOOG) Android, Microsoft (NASDAQ:MSFT) may have offered offices and workplaces a discount on Windows 8 ART tablets with Office 15, provided they signed new Enterprise Agreements after the middle of last year, according to speculation by the Business Insider.

An Enterprise Agreement, or EA, is a license with Microsoft that covers all of its software, and typically includes added benefits, such as free upgrades to the latest versions of Microsoft software.

Microsoft made some minor terminological adjustments to agreements that were entered into after the middle of 2011, expanding the products covered by the Enterprise Agreements from “qualified desktops” to “qualified devices.”

Earlier today, Microsoft announced that that Windows 8 ARM devices would come with a special version of the Office suite.

“If your EA includes Office and specifies ‘device’ then Microsoft will likely have to include Office 15 on ARM (NASDAQ:ARMH) in your EA licensing agreement,” said Cynthia Farren, principal of a software license consulting company.

Even trickier, though, is the fact that Microsoft treats non-Windows devices differently in enterprise agreements. For instance, if a company switches over to iPads from desktops, but still utilizes Windows and Office apps for those devices, Microsoft charges them what’s called a “Virtual Desktop Access” fee for each of those iPads. Furthermore, it doesn’t remove the costs of those devices from the enterprise agreement unless the company negotiates for it. Therefore, Microsoft essentially charges double per each new iPad: charging once for the iPad, and continuing to charge for the desktop no longer in use.

In this respect, they’re essentially penalizing enterprises with agreements that decide to swtich over to non-Windows devices. Companies switching out tablets for older desktops, under the newer agreements, would not have that problem.

Presently, Microsoft isn’t expected to charge less for their enterprise agreements, despite the fact that many will now likely be paying for software on both desktops and tablets. It’s also unclear how the company will deal with customers who are using the older “desktop” agreements.

Here’s how these companies are trading today:

Apple Inc. (NASDAQ:AAPL): AAPL shares recently traded at $493.05, down $0.12, or 0.02%. They have traded in a 52-week range of $310.50 to $496.75. Volume today was 21,791,361 shares versus a 3-month average volume of 12,613,900 shares. The company’s trailing P/E is 14.04, while trailing earnings are $35.14 per share.

Google Inc. (NASDAQ:GOOG): GOOG shares recently traded at $605.87, down $5.59, or 0.91%. They have traded in a 52-week range of $473.02 to $670.25. Volume today was 2,173,388 shares versus a 3-month average volume of 2,998,690 shares. The company’s trailing P/E is 20.33, while trailing earnings are $29.76 per share.

Microsoft Corporation (NASDAQ:MSFT): MSFT shares recently traded at $30.46, down $0.31, or 1.01%. They have traded in a 52-week range of $23.65 to $30.80. Volume today was 38,800,995 shares versus a 3-month average volume of 54,300,800 shares. The company’s trailing P/E is 11.03, while trailing earnings are $2.76 per share.

ARM Holdings plc (NASDAQ:ARMH): ARMH shares recently traded at $26.89, up $0.08, or 0.3%. They have traded in a 52-week range of $22.10 to $32.18. Volume today was 3,121,453 shares versus a 3-month average volume of 3,225,000 shares. The company’s trailing P/E is 68.69, while trailing earnings are $0.39 per share.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com