The Box That Could Hurt Microsoft and Squash Apple’s Hobby

This $179 box of destruction could lead to problems at both Microsoft and Apple.

Mar 15, 2014 at 1:00PM

Who would have thought that a $179 box could threaten both the PC industry and the streaming player industry at the same time? Google (NASDAQ:GOOGL) is pushing a small box made by ASUS dubbed the Chromebox. This computer which runs the Chrome operating system could be a major problem for Microsoft's (NASDAQ:MSFT) PC business, and might derail Apple (NASDAQ:AAPL) TV's plans before they even get started.

The PC industry is having enough trouble already
Pretty much everyone knows that the PC industry has problems and they aren't getting better. According to IDC Research, last year the PC industry witnessed a sales decline of 10% and 2014 may see a decline of 6%.

In the most recent quarter, Microsoft reported its OEM business saw a revenue decline of 3%. While the company's Surface revenue more than doubled, this division reported less than $900 million in sales compared to the over $5 billion generated by Consumer Licensing. Since licensing gives Microsoft a gross margin of more than 90% compared to a less than 9% margin in devices, any threat to Microsoft's OEM business is significant.

The second challenge the Chromebox could pose is, Google already has a significant lead in search and Bing doesn't need further challenges. Bing reported a 34% increase in advertising revenue in the most recent quarter, but obviously if the Chromebox is a hit Google's search business will directly benefit. No matter how you look at it, the Chromebox is a big challenge that Microsoft had better take seriously.

This company can't sit still either
It might seem that computer makers like Hewlett-Packard (NYSE:HPQ) could potentially benefit from the appearance of the Chromebox. It's nearly certain that ASUS will benefit as one of the first adopters, but HP doesn't have a great track record when it comes to anticipating trends.

The Chromebook has been around for a few years, but the difference between a Chromebook and the Chromebox is, one is designed to be a replacement for a tablet or traditional laptop. However, the Chromebox could be a second or third computer or even replace a streaming media player.

HP's Chromebook lineup is about on par with some of its peers, although slightly more expensive due to the HP brand. Where HP missed the boat completely is in the tablet market. With the iPad and strength of the Samsung lineup of Galaxy and Note tablets, HP has known the tablet market was a huge growth opportunity for a while.

Unfortunately HP's current tablet offerings show that the company hasn't learned its lesson. The company's recently HP 8 tablet was met with reviews calling the device a, "mundane tablet with a ho-hum screen ." That's actually quite an understatement as the HP 8 has a ppi of just 160 compared to Google's Nexus 7 at 323 ppi and Amazon's Kindle Fire HD 7" with a ppi of 216 .

The point is, HP gets 30 % of its revenue from Personal Systems and could use a boost like a Chromebox, but the company plans on introducing its version of the device "later this spring " and pricing hasn't been announced. This delay and questionable pricing could cut off HP's potential gains from this device before it even gets started.

Hurry up Apple!
There have been rumors for months suggesting that Apple TV would move from a "hobby" to a serious business. Whether Apple releases an actual TV set with iOS built in, or a set-top box that will integrate with live TV is yet unknown, but whatever the company expects to do it needs to hurry up.

With over 50 million iPhones and over 25 million iPads sold in the last quarter alone, clearly Apple has the interest of customers. The fact that these two devices make up more than 75% of Apple's revenue, suggests the company could use a big hit like an Apple TV to diversify the company's revenue.

The problem is, with a $179 price the Chromebox could easily substitute for a streaming player like the Apple TV. Though the Chromebox is about $80 more expensive than top of the line streaming boxes, this could be a close enough price difference to sway customers away from a limited experience to a full computer.

With the Chromebox's ability to run a full browser, plus Google's apps and with more apps coming online, this device could give customers the ability to stream everything from the web instead of relying on the apps available on other boxes.

The bottom line is, the Chromebox is a $179 weapon of destruction that Microsoft, HP, and Apple all need to be ready to respond to. If this product succeeds, Google may be able to box out its competition from the PC and the streaming media player industry at the same time.

More compelling ideas from The Motley Fool
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Chad Henage owns shares of Apple and Microsoft. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers