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Microsoft, Dropbox strike give-and-take Office 365 deal

Gregg Keizer | Nov. 5, 2014
Analysts say Microsoft gets more out of the deal, but Dropbox gets to survive.

Office and Dropbox
Dropbox will revise its iPad app so that Office documents automatically open in Excel, PowerPoint or Word on the tablet. Credit: Microsoft

Microsoft and Dropbox today announced a partnership that will integrate each company's corporate offerings -- Office 365 on Microsoft's part, Dropbox for Business on Dropbox's -- with the other's services.

The two firms, which have been competing in the cloud storage and file sync market -- Dropbox's bread and butter, a feature rather than a business for Microsoft -- will now collaborate, first on tablets and smartphones, then next year online.

Some analysts called it advantage Microsoft in the partnership, but still thought Dropbox got an important win. "What Dropbox gets out of this is survival," said Patrick Moorhead, principal analysts at Moor Insights & Strategy.

Microsoft will revamp its Office mobile apps -- Excel, PowerPoint and Word on the iPad, iPhone and Android smartphones -- in the coming weeks so that users can connect to their Dropbox accounts from within those apps. In 2015, Microsoft will add the same capability to the Office Online apps, the Web-based versions of its primary applications.

Meanwhile, Dropbox will modify its mobile app -- available now for Android and iOS -- so that Excel, PowerPoint and Word documents stored on its service can be opened using the Office apps. Dropbox also said it would create a native Windows Phone app, something it's declined to do previously, that would offer the same connectivity to Office.

"That [commitment to a Windows Phone app] shouldn't be undersold," said Wes Miller of Directions on Microsoft. "That's a 'you scratch my back, I'll scratch yours.'"

In the first half of 2015, Dropbox's Web-based interface will tie into the Office Online apps.

Both Microsoft and Dropbox touted the partnership, with the latter contending "an even more seamless experience on all platforms" would be the result. But analysts saw more pragmatic reasons for the deal, and tried to come up with a winner.

"This is sacrificing a bit of OneDrive's market advantage to help a stronger potential revenue driver in Office 365, particularly on non-Windows systems where Dropbox has a bigger head start," said Ross Rubin, principal analyst at Reticle Research. He also noted that Microsoft is reportedly working on a touch-only version of Office for Android tablets; the timing of this announcement may herald an appearance of those apps sooner rather than later.

Rubin's thoughts were echoed by others, as the deal is of value only to Office 365 customers who can access Office apps on the iPad -- the current platform of choice for mobile use of the suite.


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