Can a Cheap Windows 8 Laptop Kill Google's Chromebook?

Microsoft  (NASDAQ: MSFT  ) sold a touch-screen laptop running Windows 8.1 in its physical and online stores Tuesday for $199. This could be an attempt to gauge whether it can offer an alternative to Google's (NASDAQ: GOOG  )  Chromebooks, some of which sell for under $200.

During the one-day sale, customers could purchase an ASUS  (NASDAQOTH: AKCPF  ) X200-MA touch laptop for $199 either online or in the company's retail stores in the United States, Puerto Rico, and Canada. The laptops were offered in in black, blue, or white, and all three colors were sold out on Microsoft's store as of the early morning on the East Coast. The company touted the promotion in a blog post on its website saying that it would last a day or "until quantities run out."

Microsoft did not say how many laptops it had for sale on its website or in its retail stores. 

Best Buy  (NYSE: BBY  ) has the same ASUS model on sale for $279.99 on its website,  while other sites have models with similar specs for $299 and up. ASUS does not sell directly from its website not does it list prices.

An answer to Chromebooks?
Google's Chromebooks are an interesting attempt to disrupt the laptop marketplace, and in some ways it's working. Chromebooks are limited-function machines that look like laptops and run Google's Android operating system. The devices are largely dependent on having Internet access, and they don't run traditional programs. Instead, they rely on Google's suite of apps including its knock-offs of Microsoft Office's word processor, spreadsheet, and presentation programs. 

Chromebooks have been a hit so far. Through November 2013, the devices accounted for 21% of all notebook sales, up from a negligible share in the prior year, and 8% of all computer and tablet sales through November, up from one tenth of a percent in 2012. This is the largest share increase across the various product segments, according to a report from NPD Group.

The low-cost laptop has also captured a significant share of the education market, with Chromebooks accounting for a fifth of all mobile devices shipped into U.S. K-12 education in the third quarter of 2013. That number grew to one in four in the fourth quarter, according to Futuresource Consulting.

"Chromebooks present a number of benefits to the education market, which go further than just offering cheaper hardware," said Phil Maddocks, market analyst at Futuresource. "While savings can be made on the cost of the hardware alone, the majority of the cost savings originate from within infrastructure and device management. As Chromebooks are cloud-based devices, the security, device management, and even core content creation apps such as Google Docs are run in the cloud, which produces cost reduction on both managing and setting up the devices, as well as some software licensing costs."

Chromebooks do less than traditional laptops (and a lot less than the touch-screen Windows 8.1 ASUS machine Microsoft sold for $199), but they are the cheapest solution available to schools for a machine that offers a laptop-like experience. It's possible that Chromebook's market share was won almost solely on price, and an alternative running Windows and all of Microsoft's familiar software could be an instant success. Of course, that won't change the fact that a number of school systems have committed to Chromebooks in recent years; those schools are unlikely to scrap their investment to jump back to PCs.

Microsoft sees the need for cheaper laptops
At the Mobile World Congress in Barcelona in February, Microsoft's vice president of operating systems, Joe Belfiore, laid out some of the company's strategy for Windows 8. He also explained its commitment to working with partners to deliver cheaper devices. 

"We are committed to making Windows the best place for our partners to build great devices. Today that means different screen sizes, input methods, connectivity needs, and usage scenarios," he said. He added "We'll enable our partners to build lower cost hardware for a great Windows experience at highly competitive price points."

Microsoft gave those words some teeth when at around the same time, Bloomberg  reported that the company planned to cut prices for Windows licenses for devices that cost under $250 with no restrictions on the size or type of device. That lowers the cost from $50 to $15 for a Windows license, a move that should make it easier for Microsoft's partners to be price competitive with machines running Google's free Chrome OS. There have also been rumors that Microsoft is testing an ad-supported version of the OS called "Windows 8.1 with Bing," which could remove Android's pricing advantage entirely.

Chromebooks are a compromise
In launching Chromebook Google saw an opportunity to offer laptop-like functionality at a very low price. Since the devices had a keyboard, Chromebooks make sense as a laptop alternative whereas tablets do not. To get to a $199 price point Google had to compromise on features.

If Microsoft can regularly offer a sub-$200 touchscreen laptop, that could be a game-changer. It's hard to imagine many consumers choosing a Chromebook over a machine running a full operating system. Yes, Windows 8.1 has its detractors, and you could make an argument for Chromebooks vs. a non-touch Windows 8.1 laptop. Once you add touch there is no comparison, though. If this is a test by Microsoft to gauge interest then the fact that the website sold out quickly suggests there is demand.

If a sub-$200 Windows machine becomes standard, Chromebook's dominance of the bottom end of the laptop market will end. The only question left is whether there is a place for Chromebook at all in a world with Windows laptops at that price.

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Read/Post Comments (8) | Recommend This Article (2)

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 May 13, 2014, at 8:20 AM, CharlesThe3rd wrote:

    Lol. Too bad chrome books pay Microsoft license fee's which make them Microsoft products. So either way, Microsoft wins.

  • Report this Comment On May 13, 2014, at 9:55 AM, fool9999 wrote:

    There is more to chromebooks than price. A cheap windows laptop with a low end processor will feel sluggish whereas on a chromebook it will be more than sufficient. The original acer chromebook with a 1.1 GHZ celeron processor runs just as fast if not faster than my core i3 laptop and boots up far quicker. Chromebooks are hassle free, you don't have to restart your computer every week to update it and you don't have to worry about viruses. Battery life far outpaces the vast majority of windows laptops as well. Also, chromebooks don't run on android, they run on chrome OS.

  • Report this Comment On May 13, 2014, at 4:11 PM, SPM100 wrote:

    If Microsoft has to discount a $299 Windows 8.1 laptop to $199 in order to sell it, then Microsoft has a big problem.

  • Report this Comment On May 14, 2014, at 8:33 AM, dennistoll wrote:

    The answer to the question, I believe, is no, it can't. At least not for me. I prefer the chrome experience on a chromebook over the Windows environment. Thin client is too good an idea.

  • Report this Comment On May 14, 2014, at 10:50 AM, zx2zx wrote:

    Chromebooks do less than traditional laptops

    Are you comparing a Chromebook to a Windows laptop with the same specs (which still costs more) or are you comparing it to a laptop that is twice teh price.

    The only thing that kept me form buying my kids Chromebooks was they wanted to install Minecraft and I didn't want to try installing a Linux OS for dual boot

  • Report this Comment On May 15, 2014, at 1:53 AM, coolspot wrote:

    Recently purchased a low-cost Windows 8 Tablet (with full Windows not RT), and it's fantastic. A full PC in the palm of your hand... If Microsoft and manufacturers continue to drive the price down on these devices, laptops will soon be a thing of the past... just add a bluetooth keyboard to one of the more powerful Windows 8 Tablets and you pretty much have a more portable device than a laptop.

  • Report this Comment On May 18, 2014, at 9:53 AM, personne2 wrote:

    Seriously, look at the biased language used in this article. "knock off?" Office apps exist before and outside Microsoft's universe. And you can get touch enabled Chromebooks. But most people don't care about touch. They do care about the complexity of managing a computer and saving an incredible amount of hassle by owning a Chromebook that has great battery life, performance, and just works.

  • Report this Comment On May 19, 2014, at 6:21 PM, jameskil wrote:

    The Chromebook is a big plastic brick if it does not have connectivity, plus the software is crap. So, if you crave Crapware, and you want it hosted on an expensive plastic brick, go buy your Chromebook. Also, Google IS NOT SET UP TO SUPPORT MILLIONS OF DUMB USERS WHO CANT FIGURE OUT GOOGLE APPS plus the Chromebook hardware, and really does not want to because of the expense, resources, people required. They only put it out there because of the BUZZ it generates, just like all the other crap they produce, but never makes it to market in a meaningful way. They also embrace the Apple concept of letting the know nothing industry press speculate on "Enterprise-ness" and "mass volume" without countering it because, like the Democrats, they can allow any notion of their programs live on, without serious critique or discord because they have the mainstream media in their back pocket, as Apple and Google do with the technology press.

    The truth is, dreams of unseating MS or IBM or Cisco or HP are just that ... dreams. All because NOBODY uses their stuff for critical stuff, and they have the consumer lemmings buy a new device every 2 years (then quietly drop support for the older product line). That in of itself tells you nobody uses this stuff in enough quantity as a primary device.

    Nobody is banging on Apple to come out with a sub $200 dollar MAC or iPad or even an iPhone ... why??? Because nobody needs a cheap Apple product because no serious computing that relies on one takes place. The only exception is browser based n-tier applications ... which really don't slap around the html/CSS standards that much. And so they perpetuate Safari.

    So, Microsoft will probably not go after the sub $200 market because there is no money in it, and cream over it as you will, a sub $200 device is nothing that anybody finds that useful, appealing, or snappy, unless that is you live in a mud hut or cave.Think about it, why do people buy a large cell phone that can't make phone calls or send texts (i.e., the iPad) for just under $1000? Because Apple has the world all jacked up on the aesthetics of their products, not the usefulness of the device or its software. Then they go off and get everybody all hyped up on the next version of the product (with minimal improvements mind you) to the point they forget that ownership cost them $500 a year, after which you can't off it on eBay for more than $175. When the economics catch up with this, then lets see if world domination sets in.

    I wish you Fools could get your head out of Apple's and Google's butt's long enough to really see what's going on here.

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Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

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