This Tiny Box Represents the Biggest Threat to Microsoft Corporation's Windows

The number of devices running Google's Chrome OS just keeps growing, threatening Microsoft's control of the traditional PC market.

Feb 5, 2014 at 8:00PM

Asus announced its new Chromebox on Tuesday -- a tiny, box-shaped desktop PC powered by Google's (NASDAQ:GOOGL) Chrome operating system. At just $179, it's less expensive than even the cheapest desktops running Microsoft's (NASDAQ:MSFT) Windows, making it an attractive PC to anyone on a budget.

Most of Microsoft's hardware partners, notably Hewlett-Packard (NYSE:HPQ), have embraced Google's Chrome OS, and evidence continues to mount that the platform is slowly gaining steam.

A desktop computer about half as expensive as the competition
Until now, Google's Chrome OS has largely been relegated to the realm of laptops --  in fact, the term "Chromebook" has become synonymous with the web-dependent operating system (Microsoft refers to Chromebooks, rather than Chrome OS, in its anti-Google advertising). But Asus isn't the first company to unveil a Chrome OS-powered desktop; Samsung has been selling one for some time.

Yet, there's a major problem with Samsung's Chromebox: It's expensive. At $329, it costs about as much as the typical entry-level Windows desktop -- and unlike cheap Windows-powered laptops, most budget desktops are quite capable when it comes to performing basic computing tasks. In short, unless you really love Google, there just isn't much reason to buy Samsung's machine.

But at $179, Asus' Chromebox is completely different -- it costs only about half as much as an entry-level Windows desktop. Head to over to Hewlett-Packard's website, and you'll see that the absolute least-expensive desktop PC they sell starts at $329, almost twice as much as Asus' Chromebox.

Asus is now doing for desktops what Chromebooks did for laptops -- that is to say, Asus is selling a capable, maintance-free desktop at half the cost of similar machine running Microsoft's Windows.

Google is gaining market share and stealing Microsoft's hardware partners
Critics of Chrome OS will point to its minuscule market share -- only 1% of the PCs sold worldwide in 2013 were Chromebooks. But to asses Chrome OS's potential based on its current market share would be to ignore the momentum Google's operating system is building.

Overall, 2013 was a huge year for Chrome OS, with nearly all of the major PC manufacturers jumping on board. Hewlett-Packard alone released three different Chromebook models last year, while sales data began to shift in Google's favor.

NPD reported that, among notebooks sold in commercial channels, Chromebooks accounted for 21% of all sales from last January through November. Two of the three top-selling laptops on Amazon this past holiday season were Chromebooks, and overall, about 2.5 million Chromebooks were sold in 2013, up from a negligible amount in 2012. Chromebooks have been particularly attractive to educational institutions, and now account for about one-fifth of all mobile computers purchased by U.S. schools. The growth has been enough to catch Microsoft's eye; the Windows-maker felt it was necessary to take aim at Google with two anti-Chromebook advertisements in recent months.

Chrome OS is a bigger threat than tablets
Ultimately, Google's Chrome OS could be a far greater threat to Microsoft's Windows than the growth of tablets. While tablets serve as attractive media consumption devices, and are useful in certain business situations, they don't offer the mouse-and-keyboard focused interface or the larger screens sutiable for work. Chromebooks are also far cheaper than most quality tablets.

Google's operating system isn't capable of running local software, but that's of no concern to the many consumers or students who only browse the web, or a growing number of business users that depend completely on cloud-based, SaaS applications. Even software as complex as AutoCAD can now be accessed with a Chromebook.

Of course, the most attractive feature of Chrome OS is its price tag -- given the Windows licensing fees Hewlett-Packard must pay Microsoft, it couldn't offer anything approaching a quality Windows desktop for $179 even if it tried. In contrast, Google gives Chrome OS away for free, making extremely low-cost PCs possible.

While there are still barriers to Chrome OS's growth, the platform just keeps getting stronger, and it remains a looming threat to Microsoft's domination of the traditional PC.

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