LG isn't known for making PCs that run Microsoft's (NASDAQ:MSFT) Windows, but the company is going to start selling one with Google's (NASDAQ:GOOGL) ChromeOS. The LG Chromebase is the first all-in-one, desktop PC powered by Google's Internet-dependent operating system.
LG's step into the world of ChromeOS is yet another positive sign for Google's operating system, which has received support from many of Microsoft's longtime hardware partners, most notably Hewlett-Packard (NYSE:HPQ). As Google continues to gain support, Microsoft shareholders have reason to be concerned.
ChromeOS is insignificant -- for now
ChromeOS's share of the overall PC market is tiny. According to IDC's November data, computers running Google's operating system account for just 1% of the worldwide PC/tablet market. Although many PC OEMs have launched Chromebooks in recent quarters, Samsung is the only one to find much success.
There's just one market where Google's operating system is really having an effect: ChromeOS now accounts for about a quarter of the PCs sold for less than $300. Yet, the average PC retails for about twice that -- the sub-$300 market is a small segment.
Still, the tech landscape is far from stagnant. Although Google's share of the desktop market is insignificant today, it would be a mistake to assume that will always be the case. Google's Chromebooks have numerous advantages over traditional PCs powered by Microsoft's Windows: They boot up almost instantaneously, never need to be manually updated, and are basically impervious to traditional computer viruses.
Microsoft clearly understands the threat posed by Google's operating system -- the company has launched an ad campaign attacking Chromebooks on the grounds that they are not "real" PCs. They aren't in the sense that they can't run any local software, but in an era of cloud computing, the ability to run local software is increasingly irrelevant.
Google encourages Chromebook owners to use its own productivity software, but a basic, cloud-based version of Microsoft's Office can be accessed, as can programs of such complexity as AutoCAD. As more software migrates to the cloud, Google's Chromebooks will only become more useful over time.
Microsoft's move into hardware has alienated its partners
Meanwhile, Microsoft, in its attempt to compete with Google and Apple on the tablet front, has alienated many of its longtime allies. Hewlett-Packard's CEO Meg Whitman labeled Microsoft a "competitor" earlier this year, and rightfully so -- Microsoft's own Surface and Surface Pro PCs compete with devices offered by Hewlett-Packard.
To be clear, Hewlett-Packard isn't giving up on Microsoft's operating systems (far from it -- it's actually trying to help Microsoft explain Windows 8 to customers) but it has begun to heavily embrace ChromeOS in 2013.
HP launched three Chromebooks so far this year, and Whitman has emphasized the devices in HP's recent earnings calls. For HP, there are a few advantages to selling Google's operating system over Microsoft's: Unlike Microsoft, Google doesn't charge HP for ChromeOS, nor does it compete on the hardware front (Google's own Chromebook Pixel is an overpriced, halo item).
Will ChromeOS replace Windows?
Microsoft's Windows business won't vanish anytime in the near-future, but the story around Google's ChromeOS is still vastly underappreciated. In an era of cloud computing, the limitations of Google's operating system are slowly falling by the wayside.
With LG, HP, and other hardware partners coming onboard, ChromeOS should be expected to take a sizable chunk of the PC market in the coming years.