Microsoft is worried about the Chromebook. Should it be?

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A few days ago, Amazon revealed that its top two selling laptops during the Christmas season were Chromebooks.

This is news that we know has Microsoft rattled – and with good reason too.

The Chromebook (I own one), sells at $335 Australian dollars, a full AUD$650 less than the cheapest machine powered by Microsoft’s Windows OS at Australia’s top two retailers – Harvey Norman and JB Hi-Fi.

The difference in price is significant, a full 65% less which raises both questions and eyebrows on the amount of money Microsoft has been making from its software over the last few decades and whether this money was morally justified or not.

Sure, Chromebook screens (so far) are not as high resolution as macs or other premium PC brands. Neither are their keyboards backlit, nor do they come with storage – everything is saved in the cloud so they need to be web enabled before they can be operated efficiently.

If you can get past this though, and let’s face it, you will have to one day, as apps and files move to a cloud based storage structure, you will thoroughly enjoy this machine.

It is quick, zippy and gives you the sense that it has something to prove!

It syncs beautifully with any Android app and has a whole heap of add-ons and extensions which can be conveniently accessed through its browser.

What will not work on the Chromebook is Skype, iTunes and Spotify. But even that isn’t an issue since these apps can be easily accessed through a phone or tablet device.

Microsoft won’t be worrying about Chrome’s functionality however

It will be worrying about its revenue model instead. Microsoft has to sell its Windows OS at a certain minimum price (which I estimate to be around $600-$650 dollars) in order to make its business forecasts.

Google doesn’t have any such compulsions. Google’s revenue model is different. It will not make money from sale of its OS but fees from ads, add-ons and extensions which will only increase as the platform gains in popularity.

The latest reports indicate, it has. NPD Group reports that Chromebooks accounted for 21% of all notebook sales in 2013 and 8% of all computer and tablet sales. All from a negligible base.

Microsoft is exposed

Though Microsoft posted record results in its October 2013 announcement, and in fact grew 16%, the brand is undoubtedly exposed, and  the gains the Chromebook has made, and will continue to over time, will soon start to bite. When, we don’t exactly, since Microsoft does not break down data by Windows server, Windows OS and so on (I have not seen the breakdown in any case).

Nevertheless, we do know that the impact will be felt soon, since we do know that Windows OS does contribute the majority of the company’s revenues from its PC and notebook lines.

Will the Chromebook destroy Microsoft completely?                                                                 No. However it will make a significant inroad into an area that the brand may soon have to admit it will have to accede.

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