Microsoft needs to start worrying about Chromebooks

Microsoft needs to start worrying about Chromebooks

Summary: With Windows 8 stumbling out of the gate and Google's Linux-powered Chromebooks gaining steam, Microsoft needs to dump Windows 8 for Windows 7 on PCs and the sooner the better.

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Here are four good reasons why Microsoft needs to worry about the rise of the Linux-powered, Chrome OS-enabled Chromebooks: Acer, HP, Lenovo, and Samsung.

hpchromebook-200x149
Now, that HP has jumped on the Chromebook bandwagon, Microsoft should start worrying.

Some people think Chromebooks are going to "have just enough momentum to be a pain in Microsoft's rear end.". I think they need to look closer.

Many of Microsoft's long-time PC partners—Asus, Lenovo, Samsung, and now HP are offering Chromebooks. Why are they doing this? Because people want an affordable computer that, unlike Windows 8 systems, doesn't require them to relearn everything they ever knew about how to use a computer.

Acer CEO Jim Wong said "Windows 8 itself is still not successful," while adding that 5 to 10% of its US shipments were now Chromebooks. Think about that for a minute. Acer introduced its Chromebook in November 2012. In less than three months Chromebook went from zero to at least 5% of all Acer's US shipments. That's incredible. 

The Chromebook Gallery

At the same time, Windows 8 continues to flop. Indeed, after three months on the market, it comes to a pathetic 2.26% share of the desktop operating system market. Vista, Microsoft's previous record holder for a lousy desktop launch, had 3.3% at its third-month birthday. Adding insult to injury, Windows 8's rate of adoption is falling behind Vista's rate.

So, what can Microsoft do about this? They can do the exact same thing they did when Linux netbooks tore into their market share in 2008: Bring back an older, better version of Windows. Then, it was XP Home in place of Vista. Microsoft soon followed this with the revival of XP Pro.

If Ballmer is smart—which I seriously doubt—he'll repeat the same trick and revive Windows 7. Today, Windows 7 PCs and laptops are still available, but they're getting hard to find and the selection is getting thin.

If he's not that bright, I expect to see Chromebook sales grow to double percentages for all the Chromebook OEMs by mid-year. It happened to Vista, another dog of a Windows operating system, and I see no reason to expect it won't happen to Windows 8.

That may not all be good news for Linux. As I said in 2009, Vista's abject failure actually ended up hurting Linux. Indeed, netbooks eventually declined and now netbooks are pretty much dead. I doubt that fate awaits the Chromebook though.

Linux-powered netbooks big selling points were that they were better than Vista laptops and cheaper to boot. Chromebooks also have those advantages over Windows 8, but they have more as well. First, thanks to tablets, smartphones, and the related BYOD movement, Microsoft no longer owns the end-user experience. Indeed, Goldman Sachs already has Windows in third place behind Android and Apple.

Netbooks were also, by definition, small devices. That market space is now occupied by tablets. Chromebooks, as HP is showing, don't have to be tiny. 

Finally, Chromebooks are the first major cloud-based end-user device. When you buy a Chromebook, you don't get just a standalone device with Chrome OS. You get cloud storage, the Google Docs office suite, Gmail, and on and on. In short, for one low price a Chromebook gives you everything you need from a basic computer.

Even if Microsoft does dust off Windows 7, the Chromebook is going to far from than just a thorn in Windows' side. It's going to be a significant office and home desktop. 

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Topics: Laptops, Browser, Bring Your Own Device, Windows, PCs, Microsoft, Linux, Hewlett-Packard, Hardware, Google, Windows 8

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122 comments
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  • Every day with this....

    Seriously, Zdnet is probably the only place I ever read about Chromebooks on a daily basis. You'd think they were taking over the world by storm. It's just astounding how much the Chromebook is being overstated on this site.

    We have Microsoft earning $6 billion on Windows 8 sales of 60 million units over 3 months, and it's branded as a flop and pathetic, as seen above.

    Meanwhile, Chromebooks acount for 5% of one manufacturer's total sales and it's Tell me, if Windows 8's 3% market share (and yes, it's 3% now according to statcounter) accountign for tens of millions of installed units is pathetic, how exactly would you characterize Chromebook's marketshare? "Incredible" isn't the word I'd use. Is it even on the radar?

    Seriously, it's just sad at this point, how hard you are trying.

    Chromebooks are just the next Netbook iteration, which Microsoft owned and has chosen to abandon. Low margin devices like this are being abandoned by consumes and OEMs in favor of tablets, and that's where Microsoft is heading. There's a niche for these terrible, low quality, low cost, low utility, disposible chromebooks out there, sure. But Microsoft doesn't need to watch out, they've already ceded the space in favor of greener pastures.
    ModernMech
    • That is ZDNet for you

      "Seriously, Zdnet is probably the only place I ever read about Chromebooks on a daily basis."
      That is how they operate. Take the next big buzz word and over hype it especially if its not Microsoft. They take the "throw it at the wall and see what sticks" approach. This way if it does succeed they can claim they reported it, if it doesn't succeed they won't talk about it and just let it drift away.
      Loverock-Davidson
      • That is ZDNet for you

        "Seriously, Zdnet is probably the only place that never stops talking about Windows 8 Surface on a daily basis." That is how they operate. Take the next big buzz word and over hype it especially if its for Microsoft. They take the "throw it at the wall and see what sticks" approach. This way if it does succeed they can claim they reported it, if it doesn't succeed they won't talk about it and just let it drift away.
        Over and Out
        • Lovey and Enough Said Make Nearly Identical Comments?

          WTF, Lovey? How many personas do you manage at once?
          WhatsamattaU
      • I'm so glad i'm not alone in my feelings about ZDNET

        When I read the link to this article I had a strong feeling it was written by Vaughan-Nichols. Here's your next story Stephen....ZDNET had better watch out for theVerge!
        Rob.sharp
        • ZDNET SUCKS!!!!

          They really have gone down hill over the past couple of years. Get some real journalists.
          Technec
          • From Bloomberg 1/27/13

            Chrome-based models accounted for 5 percent to 10 percent of Acer’s U.S. shipments since being released there in November, President Jim Wong said in an interview at the Taipei-based company’s headquarters. That ratio is expected to be sustainable in the long term and the company is considering offering Chrome models in other developed markets, he said.

            Acer, which last week announced a NT$3.5 billion ($120 million) write-off on the value of its Gateway, Packard Bell and eMachines brands that pushed it into losses, is looking for alternatives as Windows-based computers struggle amid rising popularity of tablets and smartphones. Global computer industry shipments dropped 6.4 percent in the fourth quarter despite Microsoft’s latest operating system being released during the period, according to IDC Corp.

            “Windows 8 itself is still not successful,” said Wong, whose company posted a 28 percent drop in fourth-quarter shipments from a year earlier. “The whole market didn’t come back to growth after the Windows 8 launch, that’s a simple way to judge if it is successful or not.”
            JustCallMeBC
    • One more thing....

      I'm pretty sick of seeing this statistic touted around:

      "Vista, Microsoft's previous record holder for a lousy desktop launch, had 3.3% at its third-month birthday. Adding insult to injury, Windows 8's rate of adoption is falling behind Vista's rate."

      Vista did not have a lousy desktop launch, it had a lousy desktop mid-end life. The launch months were fine. If Vista continued to grow at a rate of 1.1% per month, it would have reached a market share of 40% before Windows 7 was released. This is not much worse than Windows 7, which reached 48% according to the same stat tracker.

      Windows Vista eventually only hit 20%, meaning the average per month gain was .55% per month. Windows 8 is currently gaining 0.86% per month according to hitslink. This means if we keep doing this comparison month to month, and assuming Windows 8 adoption does not decelerate, Vista will fall way behind Windows 8 in a couple months.

      But even if we follow the premise that Windows 8 is doing worse in terms of percentage adoption, it's still doing better in absolute numbers. It took 6 months for Windows Vista to sell 60 M licenses. Windows 8 did it in half the time. Further, more computers are now available in 2012 than in 2007.Since Vista was launched, 2 billion PCs have been sold. For Windows 8 to be on the same number of PCs now at 2.6% as Vista was at 3.3%, the install base would only have to have grown by 200M units, or just 10% of the number sold between 2012 and 2007.

      The conclusion is Windows 8 is on more PCs 3 months after launch than Windows Vista was 3 months after launch. How exactly is that falling behind Vista?
      ModernMech
      • Assumptions

        "and assuming Windows 8 adoption does not decelerate"

        Large assumption. Is there any reason to believe that it will not decelerate once the early adopters are sated the way most tech cycles operate?

        "How exactly is that falling behind Vista?"

        By percentages, as you stated. Vista also had the headwind of major specs needed to run it. Windows 8 will run fine on hardware that would have choked Vista wo it replaces Vista's headwind with a nice hardware tailwind. Vista was also pretty well loathed, so even matching Vista sales by percent is not a good place to be any way that it is sliced.
        SlithyTove
        • Not how technology cycles work

          "Is there any reason to believe that it will not decelerate once the early adopters are sated the way most tech cycles operate?"

          This is not how technology cycles work. The following graphic is a very common model to describe how they do behave in reality:


          http://www.abhiaggarwal.com/honors/wp-content/uploads/2011/12/tech-adoption.png

          In blue, you have a bell-shaped distribution divided into stages of adoption. In yellow, you have the cumulative distribution, which is shaped like a logistic function, growing exponentially at first, becoming linear, and then plateauing.

          Windows 8 is still in the early adopter phase. But you can see after that, growth does not taper off. It only starts slowing appreciably well into the "late majority" phase of adoption. Windows 8 still has the "early majority" phase to look forward to, when growth is linear.

          We can see this effect in action with Windows 7. Take a look at the following chart, with Windows 7 in yellow:

          http://gs.statcounter.com/#os-ww-monthly-200807-201302

          You can see it has some quick exponential growth, grows linearly throughout most of its life, and then plateaus, and has been stagnant since Oct 2012.

          Pending some disruptive event, this same pattern is likely to happen with Windows 8.

          "Large assumption."

          It's an assumption, but a reasonable one I think. More touch enabled computers are coming on the market, availability is increasing of currently models, the Windows 8 store is growing at a nice clip, and people are adapting to the interface (http://www.neowin.net/news/microsoft-people-are-quickly-learning-to-use-windows-8). Despite all the claims of terrible Windows 8 adoption, the OS has done nothing but sell more and get adopted by more people. Aside from after black Friday when there was a dip in market share, there have been 12 weeks of growth since launch according to Statcounter. iOS, Android, XP, Vista, Windows 7, Linux, and OSX cannot claim that. There’s simply no evidence that this should slow down.

          "By percentages, as you stated."

          And those percentages are meaningless. If the question is "Which OS sold more copies after 3 months" the answer is Windows 8. If the question is "Which OS had a larger install base after 3 months" the answer is Windows 8. If the question is "Which OS was more financially lucative for Microsoft after 3 months" the answer is Windows 8.

          Looking at the rates of adoption and pretty much any other factor is next to meaningless when you have to consider the amount of externalities and dissimilarities involved comparing two operating systems selling 6 years apart: growth of the market, changing of tastes, growth of internet availability, changing internet trends, changing of device trends, changing of purchasing habits, changes in the economy, changes in income, etc.. A simple comparison between the two ignores all these factors and internalizes them within the OS, so the rate of Windows Vista is due to only the merits of Windows Vista, and the rate of adoption of Windows 8 is due only to the merits of Windows 8.

          In reality, the situation is much more complex, and anyone who simply boils it down to X > Y -> X is better than Y is simply looking to get cheap clicks with sensationalist claims, and should be regarded as no better than tabloid journalism.
          ModernMech
          • Nice post

            Reasoning, supporting links, no straw men or personal attacks. Are you sure you are posting on the correct website? :)

            The distribution curve that you link to does not take into account the "chasm" effect whereby new products effectively stall out temporarily during the early adopter phase. This link shows the modified graph taking into account the chasm.

            http://www.winningware.com/blog/2010/09/reaching-mainstream-buyers-and-markets-faster/

            That is the critical period. Sales are low, but at the end of the cycle the product will either be a success and follow the cycle you described, or be a failure and sales will never exit the chasm.

            Windows has such huge momentum due to its nature in the marketplace that it will not stop dead in the chasm (people have to replace old machines after all). But I don't think we are through the chasm yet to get the clear picture.

            Also, Enterprise has yet to weigh in at all. Their reaction will say a lot (though this would have been true of Vista at this stage as well).

            I would argue that market share percentages are far from meaningless to Microsoft as part of their success criteria. If they see revenue and profit growth through an increased market size at the expense of market share I would wager that will still get chalked up as a loss in the eyes of Redmond. They want to retain dominance.

            "A simple comparison between the two ignores all these factors and internalizes them within the OS"

            Fair enough.
            SlithyTove
          • So We'll Have to Wait and See

            Your post seems to sum up the possibilities fairly well.

            My take is that current sales figures don't really say too much one way or another. Windows 8 probably saw a sales boost from being offered for much cheaper than any recent version of Windows. However, now that the initial promotion is over, and prices are going back to Windows 7 levels, I would expect sales to decline.

            If, however, people become accustomed to Windows 8 and start to actually like it, then that will push sales ahead again. Initial reaction has not been terribly favorable overall, but it's still possible it could catch on better than it has.

            We won't really know whether or not Windows 8 is succeeding or "failing" (market momentum for Windows effectively precludes the possibility of a total failure) in the market for a little while yet.

            My guess is that if Windows 8 does too badly, Microsoft will extend the life of 7 for a bit and try very hard to fix perceived shortcomings in 8, in order for 9, and particularly the Windows RT/Modern UI interface, to have better success in the future. I don't think they'll give up the idea of a unified interface easily, so I don't see a return to a Windows 7 style operating system if they feel they can at all avoid it.
            CFWhitman
          • Our IT has answered

            My choice of laptops were: two ton desktop replacement laptop with Windows XP or a MacBook Pro 13 inch with Retina Display. Windows 7 and 8 not supported. 40000 person organization.
            docpark
        • The hardware we have

          "Windows 8 will run fine on hardware that would have..."

          Windows 8 just begs for a touch screen and our hardware does not have one.
          donw1234
      • I Like Your Analysis

        But, we need to think about Windows 8 in connection with Win2000 and Win XP as representatives of Microsoft operating systems post code base merge. (As opposed to Win 98 at home and Windows NT4 at work, for those scratching their heads about what I'm talking about.)

        Now, your analysis also suggests that the early adoption take-up growth rate clearly doesn't say any thing about the mid-end life where Vista did underperform. (Underperform being relative and should be scaled against Microsoft's achievements with its other operating systems.)

        Your final paragraph could be a statistical trick, in that there are more Windows computers on which Win8 could run as compared with the market Vista entered. Since I assume that Win8 is meant to teach users how to use their applications on a Windows powered mobile device, rate of uptake is a concern for those following Microsoft's efforts to grow its business in a somewhat changed game. Win8 was discounted until yesterday. Was Vista? Win7 had a family discount at launch, as I recall. So licenses sold were at a cost to potential revenue, if upgrades are significant.

        Those of us trying to understand the numbers think most of the licenses sold are blocks acquired in advance of manufacturing. I don't think Microsoft takes the license back if the OEM restocks the computer. So, it's a good business for Microsoft right now, but if current models come back for restocking in above normal numbers, this lack of sell-through will be used to plan how many fewer licenses an OEM will commit to in the future. Perhaps there's where the mid-end pain occurs, as a good product has to suffer a bad time.

        Microsoft, meanwhile, seems to be hoping that mobile licenses make up for the pc shortfall, if it continues.

        Oh. If Chromebooks really do pull market share, Microsoft will counter with Windows Web where IE is the os and applications are in the cloud. I imagine it's already essentially baked in a development lab and only awaits the Big B's green light.
        DannyO_0x98
        • There already is a web based Windows OS

          Windows RT is the same as Chrome OS, just with IE 10.
          Stephan Sevenyoln
          • Windows RT isn't a web based OS.

            It is a Metro based OS that doesn't run Windows applications or much of anything else for that matter.
            Mah
    • If it really is that popular...

      ...then I doubt that SJVN or anyone else is going to have much success talking it down.
      John L. Ries
    • Saying Microsoft is heading for disaster or they should have a plan

      This article was about Microsoft responding to there users. They should have a plan and it should reflect all possibilities. One of the Most important things all the Microsoft fans are overlook, perhaps because the article didn't restate it enough. Major partners are releasing Chrome OS. This is not the normal small release of a few odd ball Linux distros. They are actually starting to get serious about alternative.

      Could Windows survive without partners? Well how many units did they sell in there own stores? Microsoft needs manufactures and the manufactures are beginning to not need Microsoft.

      Is Chrome OS the next OS king, probably not, but an Android Chrome OS hybrid would be very dangerous for Microsoft.
      alex_darkness
      • RE:This is not the normal small release

        of a few odd ball Linux distros. They are actually starting to get serious about alternative.
        ---------------------------

        They always come up seriously for alternatives, but have not yet managed to earn them. Do you think that the producers threw their devices with other systems on the wall and watch what get stick for fun? Every company strives to make money and is looking for a way to do that.
        For me ChromeOS is just useless. It does not give me anything more than an android tablet and is more expensive, to be honest, ChromeOS gives me less than cheap android tablet for more money. I don't even compare this -Chrome- devices to cheap laptops (Samsung Series 3 ~350-390$)... nothing to compare, cheap laptops are simply better at every field.
        Mr.SV