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Hewlett-Packard's Radical New PC Could Could Kill Microsoft's Windows

By Sam Mattera – Jan 12, 2014 at 2:30PM

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At the Consumer Electronics Show last week, Hewlett-Packard showed off a radical new desktop PC that could be Microsoft's undoing.

Last year, analysts at Gartner predicted that, by 2017, Microsoft's (MSFT -0.04%) Windows operating system would be irrelevant. Given the rapid growth of tablets and smartphones, the majority of which are powered by Google's (GOOGL -1.02%) Android, Windows is quickly falling by the wayside.

Yet there's a problem with that prediction. Tablets and smartphones are amazing, but they can't fully replace a traditional PC -- not for office workers or for gamers. As long as Microsoft owns the PC market, Windows should persist, in some capacity, for the foreseeable future -- right?

Not if Hewlett-Packard's (HPQ 0.80%) new PC catches on. Last week, the world's second-largest PC maker unveiled a radical new device, one that could ultimately destroy Microsoft's Windows business.

Android on your desktop
Pick any smartphone or tablet at random -- there's a good chance it's running some version of Google's mobile operating system. Android now powers more than 81% of smartphones, and more than 60% of tablets, worldwide. More than a billion devices running Android are expected to ship in 2014.

But not all of those devices will be mobile. Hewlett-Packard's new PC, unveiled last week at the Consumer Electronics Show, is meant to sit on your desk -- with its 21-inch screen, it would be quite difficult to lug around. Yet unlike other desktop PCs, this one doesn't run Microsoft's Windows -- it's powered by Google's Android.

What makes this machine all the more troubling for Microsoft is that Hewlett-Packard is the world's second-largest seller of Windows-powered PCs; HP's bet on an Android-powered desktop isn't just some small company's attempt at breaking into the market.

Hewlett-Packard isn't alone
But what's even worse is that the world's largest seller of Windows PCs -- Lenovo -- also plans to release an Android-powered desktop this year. The Chinese giant showed off the N308 last week alongside HP's offering.

With the world's top-two PC vendors embracing Google's operating system, it's likely that others will follow suit. If Android-powered PCs emerge as a trend, it would be quite a blow to Microsoft, particularly as Windows-powered tablets continue to struggle.

Microsoft Office could save Windows
But even if consumers flock to Android-powered PCs, business users may stick with Microsoft's operating system if for no reason other than Office -- the popular productivity software suite isn't available for Android. Subscribers to Office 365 can access a dumbed-down, Web-based version of Office, but for Excel Jockeys, it just isn't the same thing.

The growth of Android gives Microsoft's competitors an opportunity: Hewlett-Packard's Android PC will come with Kingsoft Office Suite pre-installed, an alternative to Microsoft's Office. There's also Google's own Apps, a mainstay among Android users. Still, Office may be too ingrained -- keeping the full version of Office confined to Microsoft's operating system could prevent Android-powered PCs from ever really catching on.

Android PCs: the next great tech trend?
Nevertheless, this is one trend Microsoft investors should keep a close eye on. If Android PCs do catch on, they will wreak havoc on Microsoft's Windows business and, if Microsoft keeps Office confined to Windows PCs, on its Office business as well. That's significant, as collectively, the two businesses account for the vast majority of Microsoft's revenue and profit.

As the world's top PC vendors, Hewlett-Packard and Lenovo's decision to bring Android-powered PCs to market is a troubling development for Microsoft.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Google and owns shares of Google and Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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