More PCs running Google's (NASDAQ:GOOGL) Chrome OS were unveiled at the Consumer Electronics Expo this week. Toshiba joins a growing list of companies, including Hewlett-Packard (NYSE:HPQ), Lenovo, LG, Acer and Samsung, in selling devices running the web-dependent operating system.
With the exception of Asus, all of Microsoft's (NASDAQ:MSFT) major hardware partners now sell a Chrome OS-powered PC -- and Asus is widely rumored to be working on one. Google's operating system continues to emerge as a major threat to Microsoft's business.
Toshiba joins a growing list of Chromebook vendors
Toshiba, one of the largest sellers of PCs running Microsoft's Windows operating system, unveiled its Chromebook at CES this week, and announced that the device would go on sale next month.
Toshiba's Chromebook will compete with models from all the other major PC manufacturers. Samsung and Acer were early adopters, while Dell unveiled its first Chromebook last month. But perhaps no company has embraced Google's operating system more so than Hewlett-Packard -- it rolled out three different Chromebook models last year.
There are a multitude of reasons for PC OEMs to support Google's operating system. For starters, unlike Microsoft, Google doesn't charge a licensing fee to use its operating system. It also doesn't compete with its own hardware (its over-priced Chromebook Pixel is a halo item, never intended for mass consumption).
The last part is particularly pertinent -- HP's CEO Meg Whitman identified Microsoft as a competitor last year. Microsoft's decision to sell its own Windows devices in the form of the Surface and Surface Pro could weigh on HP's sales -- every Surface Pro sold is potentially a lost sale for HP.
There's also a demand component: It seems the market for Google's laptops is finally starting to catch on. Two of the three top-selling laptops on Amazon over the holidays were Chromebooks, while NPD said last month that Chromebooks now account for about a fifth of laptops sold in commercial channels.
Microsoft targets the Chromebook in anti-Google ad campaign
Although CEO Steve Ballmer initially mocked Google's Chrome OS, Google's operating system seems to have finally caught Microsoft's attention. Late last year the company began an aggressive advertising campaign with the goal of dissuading customers from purchasing the devices.
PCs running Microsoft's operating system have a major advantage over Google's Chromebooks, as Chromebooks can't run any local software. But as Internet connection speeds improve, and more software moves into the cloud, more consumers may prefer the cheaper, faster-booting, and virus-free Chromebooks over Windows PCs.
The growth of Chrome OS could weigh on two major parts of Microsoft's business
Demand for Chromebooks, then, could take a toll on Microsoft's Windows business, as every Chromebook purchased could result in one fewer Windows license. But Chromebooks hit other parts of Microsoft's business as well.
All of Google's services are heavily integrated in Chrome OS, most notably Google Apps, its competitor to Microsoft's Office software suite. The owner of a Chromebook is much more likely to use Google Docs or Google Sheets instead of Word or Excel. They're also probably not going to use any of Microsoft's web services -- Bing, SkyDrive, or Outlook.com.
For all those reasons, Microsoft shareholders should be deeply concerned with the growth of Chrome OS. While there were many Windows-powered laptops unveiled this year at CES, the growing number of Chromebook vendors is a major win for Google.