Almost All of Microsoft’s Hardware Partners Now Sell Google’s Chromebooks

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More PCs running Google's (NASDAQ: GOOGL  ) Chrome OS were unveiled at the Consumer Electronics Expo this week. Toshiba joins a growing list of companies, including Hewlett-Packard (NYSE: HPQ  ) , Lenovo, LG, Acer and Samsung, in selling devices running the web-dependent operating system.

With the exception of Asus, all of Microsoft's (NASDAQ: MSFT  ) major hardware partners now sell a Chrome OS-powered PC -- and Asus is widely rumored to be working on one. Google's operating system continues to emerge as a major threat to Microsoft's business.

Toshiba joins a growing list of Chromebook vendors
Toshiba, one of the largest sellers of PCs running Microsoft's Windows operating system, unveiled its Chromebook at CES this week, and announced that the device would go on sale next month.

Toshiba's Chromebook will compete with models from all the other major PC manufacturers. Samsung and Acer were early adopters, while Dell unveiled its first Chromebook last month. But perhaps no company has embraced Google's operating system more so than Hewlett-Packard -- it rolled out three different Chromebook models last year.

There are a multitude of reasons for PC OEMs to support Google's operating system. For starters, unlike Microsoft, Google doesn't charge a licensing fee to use its operating system. It also doesn't compete with its own hardware (its over-priced Chromebook Pixel is a halo item, never intended for mass consumption).

The last part is particularly pertinent -- HP's CEO Meg Whitman identified Microsoft as a competitor last year. Microsoft's decision to sell its own Windows devices in the form of the Surface and Surface Pro could weigh on HP's sales -- every Surface Pro sold is potentially a lost sale for HP.

There's also a demand component: It seems the market for Google's laptops is finally starting to catch on. Two of the three top-selling laptops on Amazon over the holidays were Chromebooks, while NPD said last month that Chromebooks now account for about a fifth of laptops sold in commercial channels.

Microsoft targets the Chromebook in anti-Google ad campaign
Although CEO Steve Ballmer initially mocked Google's Chrome OS, Google's operating system seems to have finally caught Microsoft's attention. Late last year the company began an aggressive advertising campaign with the goal of dissuading customers from purchasing the devices.

PCs running Microsoft's operating system have a major advantage over Google's Chromebooks, as Chromebooks can't run any local software. But as Internet connection speeds improve, and more software moves into the cloud, more consumers may prefer the cheaper, faster-booting, and virus-free Chromebooks over Windows PCs.

The growth of Chrome OS could weigh on two major parts of Microsoft's business
Demand for Chromebooks, then, could take a toll on Microsoft's Windows business, as every Chromebook purchased could result in one fewer Windows license. But Chromebooks hit other parts of Microsoft's business as well.

All of Google's services are heavily integrated in Chrome OS, most notably Google Apps, its competitor to Microsoft's Office software suite. The owner of a Chromebook is much more likely to use Google Docs or Google Sheets instead of Word or Excel. They're also probably not going to use any of Microsoft's web services -- Bing, SkyDrive, or

For all those reasons, Microsoft shareholders should be deeply concerned with the growth of Chrome OS. While there were many Windows-powered laptops unveiled this year at CES, the growing number of Chromebook vendors is a major win for Google.

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Read/Post Comments (6) | Recommend This Article (0)

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 January 09, 2014, at 12:11 PM, emilykulish wrote:

    The PC OEMs are clueless, Google is a Trojan horse in the software, device and service industry. There free software or service is like a drug, eventually will kill all of them.

    Chromebook is web-based. It cannot do anything better than a PC, and it has much fewer features, it limits your choice as you are only allowed to use web based apps, you cannot use any competing browsers, and most of PC peripheral devices won't work.

    Now, the real killing part is, instead of creating more values like Apple and Microsoft does, Chromebook is competing on "rush to the bottom", with devices selling for only $199 or even lower. Whether Google charges license fee or not, the profit margin will only be smaller than a full-blown laptop.

    What's even worse, if a laptop is merely a web browser, then it completely defeats the purpose of buying a high-end laptop, or upgrade to a faster laptop. When that happens, Chomebook manufacturers will quickly lose momentum. By embracing Chromebook, the PC OEMs are killing themselves slowly. I guess they just realized they are doomed in anyway.

  • Report this Comment On January 09, 2014, at 1:07 PM, symbolset wrote:

    Everywhere Chromebooks are reported there are comments like: "LALALA! This is not happening. Chromebooks don't have Office. Not for business. They are web only!"

    Well it is happening. The very reasons given for why it can't be happening are exactly why it is. And there is nothing you can do about it.

  • Report this Comment On January 09, 2014, at 8:14 PM, Tony55909 wrote:

    Most people don't need full applications much anymore. A big group don't use anything but their phones. Google Docs will suffice for most people's office needs and is great for all the important services like Netflix, Facebook, Hulu and so on. Even iTunes is optional, now that Apple has a Cloud service with its phones and other devices.

    Still, Windows is very useful for a lot of people. In our home we have a Windows desktop to use a few important applications. Our Chromebooks get used more often, though. It's a pretty good system.

  • Report this Comment On January 10, 2014, at 4:58 PM, Ls650 wrote:

    I bought a Chromebook in September, more out of curiosity than anything else. I have to say I love it. I still have Windows machines at work, but for home use I find the Chromebook meets my personal needs quite handily.

    Chromebooks aren't for everyone, but for the average joe who just wants a browser, email, maybe read an ebook or watch a video, they work just fine.

  • Report this Comment On January 11, 2014, at 3:25 AM, tnewt wrote:

    Chromebooks are perfect for elementary and middle schools. These schools don't -want- there to be any locally run software, which often ends up to be malware downloaded by clueless or careless kids. Because of this Chrombooks greatly reduce their support costs (not to mention the cost of the PC itself).

    As for everyone else, it is Microsoft's own fault that people are going with Chromebooks. They don't need to attack Chromebooks, all they need to do to fix Windows 8. Previous Microsoft OS releases resulted in large PC sales increased. Windows 8 resulted in the largest PC sales drop in history. It is no wonder the PC manufacturers (and their customers) are looking for an alternative.

    The rumor is that Threshold, Windows 8.2, will make Windows more like the well liked Windows 7. But it won't come out for a year and a half. What the heck is wrong with Microsoft? What are they working on that is so much more important than the massive loss of sales to competing OSs?

    They should change their priorities, postpone all the Windows/Xbox/phone integration work or whatever the heck else they are working on and get a Windows 8.2 fix out in the market within a couple of months.

    But they won't. Well, it's their loss.

  • Report this Comment On March 07, 2014, at 4:16 AM, Windmills wrote:

    I'm reading these comment and trying to establish a time when I am without internet or VPN connectivity. I think I can safely say that its during my commute when the train goes through a long tunnel.

    I haven't yet made the leap to a full chromebook, but I have the Chrome model that Samsung put out to the shops. I use Ubuntu Linux, which I sense is a flavour of the kind of thing that Google will be pushing.

    I can work offline with Google Docs, virutalise machines (like Windows :-)), and run most of my favourite software completely free of charge. Yes it's a bit geeky, but I run my professional services company without having bought a Microsoft product for over 6 years.

    Better still, I can take the experience with me with Chrome Mobile on my USB, meaning that the underlying operating system is of little consequence (including all those snerky hardware support terms that Microsoft insist upon in its 365 licensing).

    Chrome works for Hardware manufacturers because it's simple and puts all the change costs into the browser and OS. Microsoft continues to develop into a more elaborate Swiss Army knife cutting at Swiss Cheese - large parts of its market are dis-appearing as holes in its target code-base.

    Users want services, not software. Microsoft is still trying to do both at the cost to each.

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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