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I've neglected something huge in my recent coverage of netbooks, those minimalist laptop PCs that generally cost less than $500.
Amid all of the hubbub over whether Apple (Nasdaq: AAPL ) should or shouldn't build a netbook, or reinvent the category altogether, I've failed to ask a critical question that should matter to us as investors: Why hasn't Google (Nasdaq: GOOG ) built a netbook?
No single company has more to gain. Not Dell (Nasdaq: DELL ) , not Hewlett-Packard (NYSE: HPQ ) , not Red Hat (NYSE: RHT ) , and certainly not Microsoft (Nasdaq: MSFT ) . Only Intel (Nasdaq: INTC ) gets close.
An atomic market, in every sense of the word
You might even argue that Intel has more to gain than Google does. After all, its relatively new Atom processor acts as the brains of many of Dell's netbooks. HP's, too. Were Intel to earn a decent margin on heavy Atom sales, billions would flow into its already flush coffers.
Trouble is, healthy margins may be hard to come by. Taiwan's Asus is already talking as if a $200 netbook is inevitable and Ma Bell has floated the idea of subsidizing some netbooks the way it does phones. Neither plan would help Intel's margins.
The company is concerned enough that, in December, a spokesperson told BusinessWeek that, while there's no sign of netbooks hurting sales of higher-margin laptop chips, executives are "watching it closely." I would be, too. The market for netbooks is still too small to sustainably support razor-thin margins.
Fortunately, Atom is a broad platform. Intel expects to sell the processor to makers of netbooks and smartphones. That Google isn't working with Intel to develop an Atom-compatible netbook OS is ... mystifying.
How to break Windows
Or maybe it is working with Intel, we don't really know. But if it isn't, CEO Eric Schmidt needs to call Intel chief Paul Otellini and start talking. Today.
Why? The PC as we know it is in flux. So are the platforms that run them. Consider Windows. Microsoft is rapidly closing in on the day when it can retire Vista in favor of Windows 7. XP, meanwhile, lives on for enterprise users who refuse to let go of a successful platform. (Can you blame them?)
And yet, even as these operating systems evolve, Microsoft is pouring billions into creating on-demand services via Windows Live and a cloud-computing platform that it calls Windows Azure. Call it the 2009 edition of the embrace-and-extend strategy that helped kill Netscape during the first browser wars.
Microsoft is vulnerable. Netbooks make it even more vulnerable. Dell says that one of every three Mini 9 netbooks it sells runs a flavor of the Linux OS -- Ubuntu, notably. And it's selling plenty: PC makers shipped nearly 15 million netbooks during 2008, reports ABI Research. Sales could double this year.
Let's go, Google!
Therein lies the opportunity. Buyers are getting increasingly comfortable owning something other than a Windows PC and, with netbooks, they're turning to the Web, rather than a fat hard drive, to get more of the software they use.
Good OS's Cloud is a good example. A very lightweight OS that's designed specifically for netbooks, Cloud boots directly into a browser and connects users with popular Web applications, including YouTube, Skype for phone calls, and Meebo for instant messaging. It's the OS that Google should have built, but didn't.
It's not too late. Two VentureBeat writers have already proven that Android can be a netbook OS, and Asus said in February that it would work with Freescale Semiconductor to create an Android-based netbook.
Google needn't limit itself to Android, but it needs to act. Set the netbook agenda, Eric Schmidt. Otherwise, the industry will set it for you. The netbook market is an unspoiled opportunity, free of Windows dominance. And it is the first computing platform that takes to cloud computing in a way that business users accept.
You want to break Windows? Break out a netbook OS.