For Microsoft, Samsung's Newest PC Is Evidence of a Disturbing Trend

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Earlier this month, Samsung (NASDAQOTH: SSNLF  ) announced the 13.3-inch Chromebook 2, a faux-leather-clad successor to its popular 2012 Chromebook. Like its predecessor, it's powered by Chrome OS, Google's (NASDAQ: GOOGL  ) web-dependent operating system. Although it sports a larger, sharper screen, it doesn't offer much in the way of improved functionality -- fundamentally, it's still a lightweight laptop largely dependent on Google's web services.

But at $399, it's downright expensive compared to other Chromebooks, many of which cost only half as much. Samsung could be setting itself up for failure, but the company's willingness to offer a more high-end Chromebook is not a good sign for Microsoft's (NASDAQ: MSFT  ) Windows.

The growing popularity of Chromebooks
"Chromebooks have surprised us in the breadth of their field. It is not just education, it is small business," said Meg Whitman, Hewlett-Packard's CEO, at a technology conference earlier this month (via CNet).

Hewlett-Packard has become one of the biggest proponents of Google's operating system since it launched its first Chromebook about a year ago, but it's not alone -- in addition to Samsung, almost all of Microsoft's hardware partners have jumped on the Chromebook bandwagon.

Currently, Google's Chrome OS powers just a fraction of the PCs on the market: According to IDC, Chromebooks accounted for only 1% of PC sales in 2013. Yet, despite its current niche status, Google's operating system is growing in popularity. Late last year, NPD said Chromebooks accounted for about one-fifth of all laptops sold in commercial channels, while The Wall Street Journal noted that Chromebooks are beginning to dominate educational institutions.

Microsoft pushes back
With its primary market under siege, Microsoft has gone on the offense, launching a series of ad campaigns slamming Google's operating system and altering the way it sells Windows. Last month, Bloomberg reported Microsoft would cut its Windows licensing fee by 70% on PCs that retailed for less than $250 -- around the average price for a Chromebook.

But that raises an interesting question: What is behind the growing demand for Google's operating system? Is it just an inexpensive way to access the Internet, a retread of the once encompassing netbook fad? Or is it something more?

The Chromebook 2 suggests Samsung believes there's more to Chromebooks than their price tag. At $399, Samsung is coming quite close to the average price of a Windows laptop (historically $500-700), and while there are few $200 Windows laptops, there are many that sell for $400.

More than just a cheap laptop
All of them can run local software, including Microsoft Office, giving them far more functionality than Samsung's similarly priced Chromebook. But as the owner of a Chromebook Pixel, I can attest to the appeal of Google's operating system.

Although it's limited in what it can do, what it does do, it does exceptionally well. Unlike Windows PCs, Chromebooks are virtually impervious to malware, and never require the user to install software updates. They're stunningly easy to use, with a single, easily navigable interface. If all one needs to do is browse the Internet, check email, and access cloud-based software, Chromebooks are a better bet than PCs running Microsoft Windows -- even when they cost the same.

Samsung's willingness to offer a more expensive Chromebook suggests that it's come to a similar conclusion. If the Chromebook 2 sells as well as its predecessor, it will prove that the demand for Google's Chrome OS extends beyond the budget-constrained.

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Read/Post Comments (15) | Recommend This Article (8)

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 March 18, 2014, at 2:17 PM, Interventizio wrote:

    Will we see game producers embracing widespread Android pc adoption? I certainly hope so, given that I prefer pcs over tablets, and MSFT has definitely lost its way with Win 8.

  • Report this Comment On March 18, 2014, at 7:57 PM, Spencetopher wrote:

    No Microsoft is just stupid . . . everyone HATES WINDOWS 8. Bring back Windows 7 and your sales will return. Now can I have the CEO job?

  • Report this Comment On March 18, 2014, at 10:11 PM, engguy wrote:

    "But as the owner of a Chromebook Pixel, I can attest to the appeal of Google's operating system.

    Although it's limited in what it can do, what it does do, it does exceptionally well. Unlike Windows PCs, Chromebooks are virtually impervious to malware"

    Malware is made up mostly of trojans and other USER ACTIVATED programs. Even Chrome can't fend off user stupidity. And Chrome OS kernel fell at whitehat events. Chrome browser (which comprises the non-kernel part of Chrome OS for the most part) fell twice at pwn2own 2014 alone!

  • Report this Comment On March 18, 2014, at 10:55 PM, Kummin wrote:

    Anything to see MS go down in flames I'm for.

  • Report this Comment On March 18, 2014, at 11:38 PM, spinod wrote:

    I don't like Windows 8, and love the Chromebook, but companies are being stupid with it. There is absolutely nothing you could do to a chromebook to make it worth 400 dollars.....

    There are no "apps" for it yet, and it does nothing too complicated. You are basically just opening tabs on Chrome browsers and nothing more....

    IF Google ever gets photoshop (not a cloud version) and a few other apps, ill bite. However till then its basically just a computer to browse the internet and type documents, nothing more, not worth 400 dollars.....

  • Report this Comment On March 19, 2014, at 12:18 AM, drjekelmrhyde1 wrote:

    Microsoft must have banged the person in charge of this site's mother. I mean really every single article is bashing Microsoft. Chromebooks don't even make up 1% of the market. Will this be the the year of the Chromebook meme starts now.

  • Report this Comment On March 19, 2014, at 1:02 AM, Petronilus wrote:

    There must be some sort of huge complacency problem within the Microsoft organization allowing truly inferior solutions to be launched again and again.

    In particular I have been incredibly shocked about the poor execution of "ease of use" both in the user interface of Windows 8 (trying to make PCs into touch screen devices) and all that nonsense about XBOX One controlling your living room experience (Kinect, speech recognition, IR blasting etc. not really working as incremental improvement). Decisions are made as if Microsoft was some sort of inexperienced startup company.

  • Report this Comment On March 19, 2014, at 1:50 AM, PRD50 wrote:

    Currently use Windows "8" (which I HATE-kinda rhymes don't it?)... after my old XP Laptop stopped working...Surely miss the old version...Cannot really see any improvement via Windows 8...My browser is currently Google Chrome since both my Yahoo and Explorer just come up as mostly white screens with a bit of gibberish on the side...Perhaps all the smart MS people went over to APPLE or GOOGLE for jobs!!! Just say-in...

  • Report this Comment On March 19, 2014, at 2:03 AM, lynn002 wrote:

    Windows 8 really screwed MSFT. They never should have released it. It crashes constantly and I won't even try to use it anymore. They had some good programs before this so I don't understand how they could screw things up so bad. Somebody should lose their job over win 8 probably many should and probably will from loss of customers. But it won't be the ones that should be losing their job and that's top management for releasing that piece of garbage.

  • Report this Comment On March 19, 2014, at 2:08 AM, lynn002 wrote:

    I'm sorry I wasted my money on a new lap top with Win 8 What a piece of crap.. They pretty much forced me to get Win 8 with it. They should give me a full refund.

  • Report this Comment On March 19, 2014, at 10:05 AM, doawithlife wrote:

    A good analogy. ARM is like a compact car, x86 is like truck. Both can drive 90 MPH (2GHz), but the truck is able to carry a much larger load each trip.

    In the end x86 will win. Apple knows this (they us x86 for computers/laptops and ARM for phones/tablets). Apple has patented a tablet schematic that seems to run on an x86 cpu. There are also rumors Apple is working with Intel to release an x86 phone in 1-4 years (first, I want to emphasize rumor. Second, we are a while off before x86 cpu's are small and efficient enough to run in a phone - guess we will see).

  • Report this Comment On March 19, 2014, at 10:12 AM, doawithlife wrote:

    "Perhaps all the smart MS people went over to APPLE or GOOGLE for jobs"

    To google, Apple doesn't do much RnD and subcontracts out a lot of work. Google does a lot of in house development, and honestly the place I would want to work. MS HQ is scary, reminds me of picutures of Nazi Germany (I mean that seriously).

  • Report this Comment On March 19, 2014, at 11:07 AM, AG4IT wrote:

    It's nice to see Samsung update its Chromebook offerings. Chromebooks are a great choice for users that spend most of their time in a browser and want a device that starts up fast and is easy to use.

    If you're considering Chromebooks but also need access to Windows applications you can look at solutions like Ericom AccessNow, an HTML5 RDP client that enables Chromebook users to securely connect to any RDP host, including Terminal Server and VDI virtual desktops, and run their applications and desktops in a browser.

    AccessNow does not require any client to be installed on the Chromebook, as you only need the HTML5-compatible browser.

    For an online, interactive demo, open your Chrome browser and visit:

    Please note that I work for Ericom

  • Report this Comment On March 19, 2014, at 2:20 PM, Shaman wrote:

    I am happy enjoying my new HP Chromebook. After the first try I learned Google Docs and EVERYTHING works much better than my HATED last Windows 8.1 machine. Go for Chromebook and never look back!

  • Report this Comment On March 19, 2014, at 11:56 PM, symbolset wrote:

    Should be profitable. Unlike that cheap Windows laptop. For Samsung that's what it's supposed to be about, isn't it?

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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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