Microsoft Should Be Scared to Death of Google's Chromebooks

In the 1990s, Microsoft (NASDAQ: MSFT  ) worked hard to undermine Java, Sun Microsystem's programming language. Back then, it was believed that Java would allow programmers to write applications that could effectively run on any operating system, whether it was Windows or anything else. Although it never really materialized, the promise of Java's "write once, run anywhere" design philosophy held the potential to destroy Microsoft's Windows operating system monopoly.

Well, the threat is back, and this time, it's for real. Cloud computing and web-based applications are slowly eroding users' dependency on local applications, in effect, rendering Microsoft's Windows operating system completely irrelevant. Google's (NASDAQ: GOOGL  ) cheap Chromebooks could conquer the market for traditional PCs, as Microsoft's hardware partners like Hewlett-Packard (NYSE: HPQ  ) have begun to support Google aggressively.

Microsoft shows its hand in new ad
Microsoft's new ad has drawn a bit of attention in the tech media -- writers are puzzled by Microsoft's assault on Google's Chromebooks. Business Insider's Jay Yarrow writes:

But, the weird thing about this ad is that it's aimed at the Chromebook, which seems like a nothing business so far. Microsoft actually has to explain Chromebooks in the ad since most people don't know what they are.

That's true -- Google's Chromebooks remain a paltry percentage of the overall PC market today. However, Microsoft's desire to undermine them is justified -- the Chromebook's potential is practically limitless. Although they remain hobbled by their inability to run local software, Google's Chromebooks are incredibly cheap, boot almost instantly, and are more or less impervious to traditional viruses.

Chromebooks are becoming more capable every day
Moreover, the limitations of Chromebooks are being diminished every day. Google's Chromebooks can't run any local software, but nearly anything cloud-based runs just fine. As more software developers offer cloud-based versions of their applications, Chromebooks are becoming ever more capable.

Chromebooks can even run AutoCAD, traditionally known as one of the most demanding pieces of software, because AutoDesk has begun to offer a cloud version. Although Microsoft claims that a Chromebook can't run Office, that's not really true -- owners of Google's Chromebooks can use Office WebApps, a slightly dumbed-down version of Microsoft's full Office software suite.

When Asus announced its Chromebook earlier this year, the company's CEO said that, while he didn't believe Google's laptops would ever catch on among consumers, he thought they had a bright future among businesses, governments, and schools.

That makes sense -- business software, like Salesforce's applications, are increasingly being offered in cloud form. Further, enterprise users can set up virtual desktop servers, streaming local applications to a fleet of cheap Chromebooks.

Microsoft has alienated its hardware partners
Asus isn't the only company to support Google's Chromebooks -- HP has also begun to shift its support toward Google. Earlier this year, HP's CEO Meg Whitman identified Microsoft as a "competitor." For years, Microsoft and HP had been the closest of allies, but with Microsoft taking the unprecedented step of offering its own tablets and PCs, HP feels threatened.

Every time Microsoft sells a Surface Pro, that's potentially a lost sale for HP. And when HP does sell a Windows device, it has to pay Microsoft money for the privilege. That said, HP still sells mostly Windows machines, and likely will for many quarters to come.

But so far this year, HP has rolled out three new Chromebooks, and I wouldn't be surprised if more are in the works. As Microsoft pushes its "devices and services" strategy, HP becomes ever more incentivized to offer alternatives to Windows.

Will Windows survive?
Perhaps the most ironic thing about the rise of the Chromebook is that Microsoft is slowly transforming Windows into a copy of Chrome OS. Windows 8.1, Microsoft's recent update to the Windows operating system, merges Microsoft's online services -- SkyDrive and Bing -- with Microsoft's local operating system.

Windows PCs can still run local software, but with Windows 8.1, they're more connected than ever before. In the way that Chromebook users store their files on Google and become reliant on Google search, SkyDrive integration means that more local files are being stored on Microsoft's servers, while Bing search becomes integrated into the overall experience of using a Windows PC.

Microsoft's Windows has tons of inertia behind it, and it certainly isn't going to go away anytime soon. Yet, although Google's Chromebooks remain just a tiny part of the larger PC market for the time being, unlike the broader PC market, the demand for Chromebooks is actually growing.

With the support of Microsoft's spurned hardware partners like HP and the growth of cloud computing, Google's Chromebooks are a very real threat to Windows and shouldn't be taken lightly.

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Read/Post Comments (9) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 29, 2013, at 2:15 AM, teral wrote:

    This site is a master on click bait.

    Have you heard about Tata Nano?

    Well, Tata nano is a striped down car for basic transportation, his engine is derived from motorcycles engines, and is really cheap. You can search on the web, now you think this diminutive car is a threat to pick up trucks?

    The same apply to pc's, think about CB as the nano and pc's as trucks, they are aimed to different markets, a user that need heavy computing power will never consider a CB, people that use computers for just for web browsing are the potential customers for CB, but the problem with CB are that they don't do anything better than tablets, and people tend to prefer use tablets than laptops, just put two children or teenagers to chose between a tablet and a CB and guess what they will choose.

    This article use a rerun arguments that I have hear since the launch, however in the case of OEM's seems that the venture on CB start to show signs of failure, first only Samsung is being successful selling CB

    http://www.zdnet.com/latest-idc-figures-show-chromebooks-con...

    Second, HP had an strange issue with overheating chargers, that pull off the shelf CB 11, the strange thing is that the solution could be very simple, just provide the customer with a new compliant charger, but seems that the reason to pull out of the shelf is that no one is buying. Some OEM's seems to being wheedling by Google into the CB venture.

    Autocad in CB? Actually a web app, and can use in almost any browser, however, as a user of autocad, the web app is almost a joke, yes you can open to review and do some minor adjustments, but is far, FAR to be a productive app.

    Respect the ad, I think that is a spot on in the main premise; people are unaware of what a CB is.

    More than a reaction to the "threat" of CB is a reaction to the marketing of Google that compare CB to PC's.

  • Report this Comment On November 29, 2013, at 9:22 AM, badgerzilla wrote:

    @teral, Correct me if I am wrong but. Computers communicate to us using keyboard, mouse, touch and microphone for input and monitor, speakers and vibration for output. The computer itself can be running Windows, Linux, CICS, OSX, Android, iOS or whatever. Mobile devices can communicate over the air while PCs communicate a wire connected to the wall. Mobile computers are portable like a rockets where as non mobile are stationary like NASA's Mission Control. Mission Control is the brains of the mission and the rocket contains the explorers. People on the rocket need to know the weather but weather calculations are done on Cray Supercomputers and are too heavy to fit in the rocket so those are at Mission Control and this information is sent to the rocket with a wireless link. I do not see anything wrong with this architecture. I do not believe one needs to add more fuel and weight just to put the Cray Supercomputer on the rocket. I vote to leave the Super Computer on the ground and utilize the mobile connection. That is what it is there for.

  • Report this Comment On November 29, 2013, at 11:51 AM, teral wrote:

    @badgerzilla

    If that work for you Ok, but when you get stuck in the dark side of the moon without connection to mission control and need to do the complex calculations to use the correct amount of fuel to launch the spacecraft, the exact angle to exit the lunar gravity and how much weight you need to leave in order reach the earth without run out of fuel, good look doing that by hand.

    Problem is that these approach of dumb terminal, make sense in the 90's when hardware was EXPENSIVE, but we are in 2013, for the same money of a CB you can get a more compelling device, lighter, powerful etc.

  • Report this Comment On November 29, 2013, at 12:21 PM, techy46 wrote:

    Microsoft's raising appropriate concerns for Google's Android malware and virus approach to freeware for the sake of advertising spam in the only language lame consumers might understand. It doesn't matter though consumers will buy junk at cheapest prices for instant gratification ala Walmart every time. I even bought my new Asus T100 64gb 2-in-1 10" notebook tablet there for $379 just to save $20 and deal with the big box locally instead on Amazon shipper. Oh well, the US is going to be screwed by consumerism sooner or later so invest wisely.

  • Report this Comment On November 29, 2013, at 12:43 PM, symbolset wrote:

    I find this article a thoughtfully considered, carefully measured assessment of the situation. Insightful and informative analysis timely and well presented. Thank you Sam.

  • Report this Comment On November 29, 2013, at 5:46 PM, badgerzilla wrote:

    @teral, We are not talking Pink Floyd here. Chromebooks have an offline mode and will work offline as does Linux. You can even load a full distro like RedHat on them also. This can not be done with RT as it has a locked boot-loader. If I needed a super computer, I could just use my cell phone. With Moore's law and all, we will all have super computers in our pockets. Problem for Microsoft is that no super computer runs Windows. They all run Linux.

  • Report this Comment On November 29, 2013, at 10:24 PM, teral wrote:

    @badgerzilla

    In a nutshell, smartphones are more powerful than CB, and more fun too.

    So, what's the problem with windows not running supercomputers?

    Pc's are general purpose computers aimed to consumers and corporations, and for most uses pc's are more than capable, if you are a scientific doing mega complex calculations, then use a super computer, but I don't see why I will want to use a caterpillar just to move a couple of plywood sheets and few cement bags, for that I will use my trusty ford F150.

  • Report this Comment On November 30, 2013, at 1:25 PM, SPM100 wrote:

    Microsoft should be scared to death by Chromebooks? They are scared to death by Chromebooks, thats why they have gone ballistic in their attacks on the Chromebooks.

  • Report this Comment On December 02, 2013, at 3:21 AM, teral wrote:

    Personal attacks are sign of lack of arguments.

    I don't understand your point.

    First you say that you prefer a CB (that basically is a .22 single shot pistol according to your analogy) over a PC (that could be an AR15)

    Then criticizes someone that thinks that a AR15 is enough to keep their house safe (in a civilized county) to not choose a M61 gatling gun.

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