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By keeping its Office productivity suite off the iPad, Microsoft has given its new Surface tablet a key competitive advantage in a market to which it is a very late entrant. That might seem like a strategically sound decision — creating a perceived deficit on a rival’s tablet by limiting distribution of a very popular piece of software to your own. But it could prove to be a bad move fiscally.

To wit, a new report from Morgan Stanley analyst Adam Holt, who argues that Microsoft is leaving money on the table by not releasing Office for iOS. A lot of money.

Holt figures that if Microsoft were to release Office for iOS, pricing it at $60, it could potentially sell it to roughly 30 percent of iPad users. Extend that to an installed base of 200 million iPads in 2014, and Holt concludes that Microsoft would generate about $2.5 billion in revenue per year on Office for iPad — less Apple’s App Store commission.

office_ipadNow, Holt’s math here is back-of-the-napkin at best, but even so, it makes a valid point. By not releasing Office for iPad, the company is surely leaving a bunch of milk in one of its most important cash cows.

But it’s not like Microsoft doesn’t know that. And it’s more likely than not that the company is very carefully weighing tradeoffs here, and trying to determine if keeping Office off iOS is a sufficient incentive for enterprise to use Surface and other Windows tablets. Indeed, asked about Office for iPad at the Goldman Sachs conference earlier this week, CFO Peter Klein seemed to suggest that Microsoft is keeping the door open for it.

“We have a history of cross-platform delivery broadly in productivity, whether it’s Office on the Mac, or email, communications, note-taking,” Klein said. “And with our Web applications you can access Office documents, do some light editing on any device and on any browser. So there’s a lot of things that we’re already doing to meet that need. And we’ll continue to think about other things going forward.”