Google (NASDAQ: GOOGL ) Chromebooks have been surprisingly controversial. On one hand, there are plenty of things going for them -- they're cheap (if you exclude that ultra-expensive Chromebook Pixel), fairly easy to use, and are thin, light, and offer solid battery life. These devices' popularity isn't surprising given how well received netbooks were back in the day as incremental devices.
In a world where tablets matter, PC OEMs can't get by with shoddy devices like the netbooks of old, but in a world where cost, power, and form factor matter, well-designed machines like the Chromebook can (and often do) perform very well.
Intel isn't missing the Chromeboat
Intel (NASDAQ: INTC ) is the world's largest chipmaker, but it is guilty of "missing out" on several fundamental paradigm shifts in computing. While the company isn't all that late to the game on iPad-like tablets (although the company still needs to gain much more traction on Android), smartphones have proven to be elusive. To be fair, very few other than Qualcomm have had anything more than fleeting success in this space. That being said, the company doesn't seem to be missing the Chromebook "revolution" -- no matter how large or small it ultimately ends up being.
At the company's recent investor meeting, it showed a slide claiming that it went from a 40% market segment share in Chromebooks during the first quarter of this year, to a 51% share by the third quarter. That's a nice gain indeed.
In just three quarters, the company has taken a dominant market segment share in Chromebooks. Note that Chromebooks were highly touted as a low cost alternative to Windows PCs and would ultimately prove to be a clear negative for Intel and a boon for ARM Holdings (NASDAQ: ARMH ) PC ambitions. Clearly, Intel isn't going to go down without a fight.
The more troubling thing for the ARM vendors is that Intel isn't just deploying its low-power SoCs into this space -- it is deploying cut-down versions of its highest end Core processors into this space. While Intel will eventually transition away from the cut-down Core processors and use the highest-end Atoms in this space, the company isn't wasting any time. This is the right move from a strategic standpoint -- market share first, margin refinement later.
A nice side-benefit for Intel is that the performance levels of Intel-based Chromebooks are so far and away above whatever ARM parts are being pushed into this segment, (while offering similar battery life and similar system costs), that Intel has effectively blocked the ARM vendors from competing. Although if Qualcomm or NVIDIA started pushing into this space with their low-power SoCs, the landscape would probably change.
What does this mean for Mr Softy?
Quite frankly, (full disclaimer, no crystal ball here), while Chromebooks may gain a non-trivial slice of the consumer PC market, these devices may not be able to dent Microsoft's (NASDAQ: MSFT ) business. Further, given that many of the Taiwanese and Chinese ODMs are pushing extremely inexpensive, full Windows 8.1 devices using Intel's low powered Bay Trail-M (this is essentially a tablet processor repurposed for low cost, low power notebooks), consumers may have less of a reason to go with Chromebooks over cheap Windows 8.1 machines.
But it's all going to come down to just what the system vendors can do with "cheap" Windows machines. Intel knows that its bread is buttered by Microsoft's Windows, so it will work very closely with the PC vendors to get quality, low cost Windows 8.1 devices to market. While the overhead of a Windows license impacts what the system vendor can do either on price or quality (every dollar counts in the low end), Windows could likely prove to be a feature that's worth far more to the end user than whatever additional cost is added.
To illustrate this point, the ASUS Transformer Book T100 ($379 convertible with an Atom and Windows 8.1) rose to the top of the best-sellers list quickly. Further, on that list, seven systems were running Windows, eight were powered by Intel processors, and ARM and AMD each scored one win.
Foolish bottom line
At the end of the day, Intel is out to provide the best chips on every platform -- Microsoft, Google, or Apple. While Google's Chromebooks are attractive, low cost machines, the Windows PC ecosystem is more vibrant today than it has been in many years and at every price point and screen size. Intel is well positioned as the arms dealer in this new, multi-OS world of consumer computing, and for Intel investors, it doesn't matter who wins.
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