Techworld

Chromebooks' success punches Microsoft in the gut

Amazon, NPD Group trumpet sales of the bare-bones laptops in 2013 to consumers and businesses

Chromebooks had a very good year, according to retailer Amazon.com and industry analysts.

And that's bad news for Microsoft.

The pared-down laptops powered by Google's browser-based Chrome OS have surfaced this year as a threat to "Wintel," the Microsoft-Intel oligarchy that has dominated the personal-computer space for decades with Windows machines.

On Thursday, Amazon.com called out a pair of Chromebooks -- one from Samsung, the other from Acer -- as two of the three best-selling notebooks during the U.S. holiday season. The third: Asus' Transformer Book, a Windows 8.1 "2-in-1" device that transforms from a 10.1-in. tablet to a keyboard-equipped laptop.

As of late Thursday, the trio retained their lock on the top three places on Amazon's best-selling-laptop list in the order of Acer, Samsung and Asus. Another Acer Chromebook, one that sports 32GB of on-board storage space -- double the 16GB of Acer's lower-priced model -- held the No. 7 spot on the retailer's top 10.

Chromebooks' holiday success at Amazon was duplicated elsewhere during the year, according to the NPD Group, which tracked U.S. PC sales to commercial buyers such as businesses, schools, government and other organizations.

By NPD's tallies, Chromebooks accounted for 21% of all U.S. commercial notebook sales in 2013 through November, and 10% of all computers and tablets. Both shares were up massively from 2012; last year, Chromebooks accounted for an almost-invisible two-tenths of one percent of all computer and tablet sales.

Stephen Baker of NPD pointed out what others had said previously: Chromebooks have capitalized on Microsoft's stumble with Windows 8. "Tepid Windows PC sales allowed brands with a focus on alternative form factors or operating systems, like Apple and Samsung, to capture significant share of a market traditionally dominated by Windows devices," Baker said in a Monday statement.

Part of the attraction of Chromebooks is their low prices: The systems forgo high-resolution displays, rely on inexpensive graphics chipsets, include paltry amounts of RAM -- often just 2GB -- and get by with little local storage. And their operating system, Chrome OS, doesn't cost computer makers a dime.

The 11.6-in. Acer C720 Chromebook, first on Amazon's top-10 list Thursday, costs $199, while the Samsung Chromebook, at No. 2, runs $243. Amazon prices Acer's 720P Chromebook, No. 7 on the chart, at $300.

The prices were significantly lower than those for the Windows notebooks on the retailer's bestseller list. The average price of the seven Windows-powered laptops on Amazon's top 10 was $359, while the median was $349. Meanwhile, the average price of the three Chromebooks was $247 and the median was $243, representing savings of 31% and 29%, respectively.

In many ways, Chromebooks are the successors to "netbooks," the cheap, lightweight and underpowered Windows laptops that stormed into the market in 2007, peaked in 2009 as they captured about 20% of the portable PC market, then fell by the wayside in 2010 and 2011 as tablets assumed their roles and full-fledged notebooks closed in on netbook prices.

Amazon's best-selling laptops on Friday included Acer and Samsung Chromebooks in the No. 1 and No. 2 spots.

Chromebooks increasingly threaten Windows' place in the personal computer market, particularly the laptop side, whose sales dominate those of the even older desktop form factor. Stalwart Microsoft partners, including Lenovo, Hewlett-Packard and Dell, have all dipped toes into the Chromebook waters, for example.

"OEMs can't sit back and depend on Wintel anymore," said Baker in an interview earlier this month.

Microsoft has been concerned enough with Chromebooks' popularity to target the devices with attack ads in its ongoing "Scroogled" campaign, arguing that they are not legitimate laptops.

Those ads are really Microsoft's only possible response to Chromebooks, since the Redmond, Wash. company cannot do to them what it did to netbooks.

Although the first wave of netbooks were powered by Linux, Microsoft quickly shoved the open-source OS aside by extending the sales lifespan of Windows XP, then created deliberately-crippled and lower-priced "Starter" editions of Vista and Windows 7 to keep OEMs (original equipment manufacturers) on the Windows train.

But Microsoft has no browser-based OS to show Chromebook OEMs, and has no light-footprint operating system suitable for basement-priced laptops except for Windows RT, which is unsuitable for non-touch screens. And unlike Google, Microsoft can hardly afford to give away Windows.

But Microsoft's biggest problem isn't Chrome OS and the Chromebooks its ads have belittled: It's tablets. Neither Microsoft or its web of partners have found much success in that market.

Baker's data on commercial sales illustrated that better than a busload of analysts. While Windows notebooks accounted for 34% of all personal computers and tablets sold to commercial buyers in the first 11 months of 2013, that represented a 20% decline from 2012. During the same period, tablets' share climbed by one-fifth to 27%, with Apple's iPad accounting for the majority of the tablets.

"The market for personal computing devices in commercial markets continues to shift and change, said Baker. "It is no accident that we are seeing the fruits of this change in the commercial markets as business and institutional buyers exploit the flexibility inherent in the new range of choices now open to them."

But when you're at the top of the personal computing device heap -- as Microsoft was as recently as 2011 -- words like "change" and "choice" are not welcome. From the mountaintop, the only way is down.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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