Google Counterpunches Microsoft

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"Ode to a Tiny Giant"

Market pressures mingle;
Born from old and new combined:
The H-P netbook?

-- Anders Bylund, five seconds ago

The Android platform is more than just an operating system for smartphones. Hewlett-Packard (NYSE: HPQ) could be the first major system builder to mold a portable computer around Android.

Microsoft (Nasdaq: MSFT) had better take Android seriously. The hottest new trend in personal computers is the netbook. According to researcher IDC, about 20 million diminutive computers are expected to ship this year. That's double last year's netbook market, thanks to a confluence of factors:

• At less than $500 for a complete system, a netbook is easy on the wallet -- which is very attractive to Joe the Plumber in this global financial crisis.
• Computer hardware has become so powerful that today's low-end mobile chips from Intel (Nasdaq: INTC), Advanced Micro Devices (NYSE: AMD), or even ARM Holdings (Nasdaq: ARMH) can handle the simple applications we use the most: Web browsing, email, the occasional text document, and simple but addictive games.
• Netbooks fall in a nice consumer niche. Their capabilities are between the bulky, more powerful desktop or notebook systems and the extremely portable Apple (Nasdaq: AAPL) iPhone and its smartphone brethren.

Clearly, Microsoft would like to transfer the stranglehold it has on operating systems for traditional consumer-level computers onto this booming usurper. Right now, Windows-based netbooks dominate the market. However, transferring their operating system dominance in traditional PCs over to netbooks has proven more difficult than expected. Linux is making inroads via netbooks from Acer, Asus, and HP.

And now, HP is thinking about moving Google's (Nasdaq: GOOG) Android platform into the netbook space. Android marries the highly customizable Linux environment to mobility-friendly extensions like high-speed 3G mobile networking and a modern security model that separates various functions into separate virtual machines.

If HP goes live with Android netbooks, that would be huge for the Android platform and its numerous hardware and software partners like ARM and Qualcomm (Nasdaq: QCOM). It would also be a big minus for Microsoft.

Marrying smartphone software to notebook hardware could throw gasoline on the netbook fire. Mr. Softy may have to adapt by making a hybrid out of Windows Mobile and plain old Windows -- at a minimum it forces Microsoft to take the market seriously and ship an entry-level Windows 7 system that's not too bloated for the tiny resources netbooks contain. While Android might present a small threat to Microsoft's immediate future, it's a foothold for Google to compete head-to-head with Microsoft in the operating system space.

The next computer you buy might be small, hyper-connected, and bristling with Androids. Google's taking the fight to Microsoft's bread and butter.

Further Foolishness:

• Why Isn't Google Making a Netbook?
• The Tech Recession Takes Another Victim
• 5 Stocks That Will Rock the Netbook Revolution