Apple, Inc. Needs to Take the Chromebook Threat More Seriously

Acer's Chromebook 13 presents an interesting challenge to the MacBook Air. Credit: Acer.

At $279, Acer's new Chromebook is a fraction of the price of a MacBook Air but features a high-powered NVIDIA (NASDAQ: NVDA  ) Tegra K1 processor for delivering what should be remarkable graphics performance. Storage (16 GB solid-state hard drive for the Chromebook vs. a minimum 128 GB of storage for the Air) and software (Chrome OS vs. Mac OS) appear to be the major differentiators.

Is a bigger hard drive -- and the lure of the Mac -- enough to keep potential switchers from buying the Chromebook? I'm not so sure. In fact, after looking at the data, I wonder if this is the biggest challenge Apple, Inc. (NASDAQ: AAPL  ) faces right now.

Triple threat

Chromebooks are selling at a brisk pace. According to Gartner, annual sales are on pace to nearly triple over the next three years -- from 5.2 million in 2014 to 14.4 by 2017. Last year, a variety of vendors sold 2.9 million Chromebooks.

Schools are benefiting most. Over 10,000 have Chromebooks either in classrooms or on campus. Gartner, for its part, estimates that 85% of those sold last year went to educational institutions. Google (NASDAQ: GOOGL  ) (NASDAQ: GOOG  ) and its hardware partners are challenging Apple in a core market that executives take quite seriously.

"Macs performed well in the U.S. education buying season, with double-digit growth in the K-12 market, driven primarily by large deployments of MacBook Air," Chief Financial Officer Luca Maestri said during Apple's fiscal third quarter conference call on July 22. 

Maestri also referred to IDC data that says the iPad accounts for 85% of the U.S. education tablet market. "We've now sold 13 million iPads to education customers globally," he added.

Impressive progress all around, but also not enough to deter would-be Chromebook buyers.

A cloudy future for business

Longer term, Gartner expects businesses to get more serious about Chromebooks. From the press release announcing its findings:

"[Chromebooks] also encourage more collaboration and sharing of content. As more users work collaboratively in the cloud, collaborative working practices are likely to become more common which may further increase the appeal of Chromebooks and similar devices."

Google data helps to corroborate that claim. The search star has said repeatedly that 5 million businesses use Google Apps for Business. With NPD estimating that 25% of all low-cost laptops sold in the U.S. sold are now Chromebooks, it seems likely that a fair portion of those companies are using the device in some form.

Google isn't the only problem

Which Chromebooks are they buying? Two vendors stood out in Gartner's analysis of the market.

Source: Gartner (July 2014)

That Samsung still leads the market it helped pioneer isn't surprising. But at 21.4% of the market, Acer is starting to look like a serious rival. And now, with NVIDIA's help, the company is making a serious machine. (The Tegra K1 chip with its 192 graphics cores is widely regarded as a peer of desktop processors in terms of performance and power management.)

"Multi-tab browsing, multitasking and 10-person HD Google Hangouts via the 720p webcam do, however, aim to make this Chromebook competitive with Intel Core i-series-level models," CNET's Scott Stein wrote in a review. The latest MacBook Air leans on the i5 or i7 chip, depending on the model. (Though, to be fair, Stein didn't offer any sort of comparison between the Air and the Chromebook 13.)

Foolish takeaway

Will high-performance models like Acer's Chromebook 13 take a visible bite out of MacBook Air sales? I think it's too early to tell. But looking at the data we have so far, I also think the threat is very real. Keep an eye on Gartner's and IDC's quarterly PC market share reports, Apple investors. If the Chromebook starts taking a toll, you'll see the impact there first.

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Read/Post Comments (8) | Recommend This Article (5)

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 August 26, 2014, at 7:30 AM, jdmeck wrote:

    No internet and you have a brick. I'm not worried, and Apple should not be worried.

  • Report this Comment On August 26, 2014, at 7:56 AM, TMFMileHigh wrote:

    @jdmeck,

    >>No internet and you have a brick.

    Except that you don't.

    Every Google app is available offline for working where there isn't Wi-Fi, which may be why Chromebook sales appear to be accelerating.

    Thanks for writing and Foolish best,

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

  • Report this Comment On August 26, 2014, at 11:45 AM, rimbauda wrote:

    I'm regret having to power up my bloated Windows laptop and having to sit through iTunes updating and syncing my iPod. It's not much better on my daughter's brand new MacBook Pro. Once you get hands-on with a Chromebook, it's hard to go back. I still have documents on OneDrive and iCloud, but I find the associated webapps on my Google Drive easiest to use. Pretty soon, I will not going back even for iTunes.

  • Report this Comment On August 26, 2014, at 12:11 PM, KayakerRW wrote:

    My school purchased several classroom sets of Chromebooks, which work great for many classroom needs, especially for students who do not have internet or computer access at home.

    The low cost (and small size) means more students can use them (more classroom sets) than when schools buy laptops or set up computer labs.

    This should be a growth market for schools. There are still some classes that need more sophisticated computers and programs, but a Chromebook meets most school needs for students.

  • Report this Comment On August 26, 2014, at 1:02 PM, mcsandberg wrote:

    Suggest you take a look at http://richard.esplins.org/static/downloads/unix-haters-hand... and then consider that the Chromebook comes from people who <i>like</i> unix...

  • Report this Comment On August 26, 2014, at 1:32 PM, Wingsy wrote:

    Yes, Apple should take the Chromebook threat as seriously as they took the netbook threat.

  • Report this Comment On August 27, 2014, at 6:46 AM, Mathman6577 wrote:

    I don't think Apple is fearing the Chromebook. Just like the wireless industry Apple cares about profit and not marketshare. I don't understand why all these articles keep falling into that "media-like" trap.

  • Report this Comment On August 31, 2014, at 1:36 PM, randSaver wrote:

    I'm assuming Apple could release a simple, cheap laptop to answer the threat if they wanted to / felt it necessary (or would they choose not to cheapen their brand image?). Something I'll keep a watch on while I hold long term GOOG, GOOGL and AAPL.

    Appreciate the article.

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