Why Microsoft Should be Worried About Chromebooks

on June 4, 2014

For more than 30 years, the Wintel consortium ruled the world of personal computers. This consortium was made up of a partnership between Intel and Microsoft joined at the hip when it came to creating PCs. But about three years ago that partnership began to break up. While Intel had been extremely loyal to Microsoft and its Windows franchise, Microsoft decided to back ARM-based tablets when they got into hardware and created their first Surface product. Microsoft’s move into the ARM space did not take me by surprise. In fact a year earlier in PC Mag, I wrote about the fact Microsoft had an ARM-based version of Windows under works in their labs and suggested even then that they may enter the hardware market with their own product using an ARM-based processor.

But Microsoft kept that news a secret and only a few days before they announced the original Surface tablet did Intel, HP and other PC makers even know Microsoft was not only doing a tablet of their own but had deviated from an Intel processor and used an ARM chip instead. I remember at the time the feedback I was getting from the PC crowd, who had loyally supported Microsoft through the industry’s ups and downs – this was kind of a stab in the back by Microsoft and they were not happy about it.

Unfortunately for the PC guys, Microsoft woke up to the fact they were so behind in tablets and not gaining enough ground in smartphones they needed to be more like Apple and make a fundamental shift towards owning the hardware, software and eco-system if they had any chance of competing with the IOS and Android crowd. This move has not worked out quite as well as they had hoped. The original Surface based on the ARM processor was a total failure and even their Intel based Windows 8.1 Surface models are only doing modestly well against Apple and Google’s tablet partners.

However, Microsoft’s decision to support ARM processors took away any possible guilt of Intel. The PC vendors are aggressively supporting Android and more recently Google’s Chromebook. This is a big deal and one that will have ramifications for Microsoft in the future. I know creating the Surface tablet and support for ARM seemed strategic but it really did impact the way Microsoft’s partners viewed their allegiance to Microsoft. Now Intel, AMD and all of the PC vendors are backing Android and Chrome and over time I think this will eat into Microsoft Windows marketshare significantly. With the momentum of Android, Intel and the PC vendors were going to be forced to join in Google’s quest at some point but when I talk to these vendors it was pretty clear their support for Android only gained real steam after Microsoft supported ARM and starting doing their own hardware.

In fact, it pushed Intel into bed with Google in ways Microsoft surely had not expected. Indeed, Google agreed to work closely with Intel to make sure Android would work well on Intel processors and it’s starting to pay off. Intel hopes to ship 40 million tablets in 2014 and double that in 2015 and most of those will be Android based. But where I see an Intel/Google relationship really impacting Microsoft going forward is their recent partnership around Chromebooks. At an event in San Francisco two weeks ago, Intel showed off the first generation of Chromebooks using their Core i3 mobile processors. Up until now, all Chromebooks had been ARM-based or used Intel’s Celeron processor and, by nature of these chips, they were never considered powerful laptop/desktop class CPU’s. But Intel putting a Core i3 processor in a Chromebook puts them in the class of other Intel Core laptops, albeit at the low end. Still, this is significant.

One thing you will notice when using an Intel Core i3 processor vs the top ARM chip in Chromebooks is how much faster a web page and graphics load.
Sure the apps are all HTML and Web based, but in a laptop or clamshell design, which blurs the line between consumption and productivity, faster speeds in these areas as well as better overall performance brings Chromebooks into the traditional laptop space. Yes, there are cheap Windows laptops but in our research we are finding, especially with consumers, the need for Windows and Windows apps are fading in this consumer market. In fact, we are seeing some school districts buying only Chromebooks now and hundreds are testing them in pilot programs.

What convinced me I had to look closer at Chromebooks was a chance encounter at a breakfast diner in Santa Barbara last fall. In the booth across from me was an elderly woman, probably in her mid to late 70’s, happily typing away on her Chromebook. As I was leaving I stopped at her table and asked her why she chose a Chromebook. I thought price would be the first thing she would say but instead she said “I looked at Windows laptops and Chromebooks and found that a Chromebook would meet all of my needs.” Pus, she added, she liked the sleek and light design. Since then, I have heard this frequently in our research. For a lot of consumers, Chromebooks are all they really need since most of what they do today is via Web browsers and there are a lot of Web apps that replace dedicated apps they might have used in the past on Windows laptops.

That is why Intel has pushed their partners hard to do Chromebooks with the Core i3 in them and all of the PC vendors have at least one Core i3 Chromebook in their lineups now. Even though these Intel Core i3-based Chromebooks have about a $50-75 dollar premium over ARM based Chromebooks, I believe as word gets out about the better performance one gets on an Intel Core i3 based Chromebook, it will convince many who would buy an ARM-based Chromebook or even Intel-based Celeron models that today they are at price parity with one’s using an ARM processor.

This ultimately means Microsoft now has a battle on three OS fronts. Along with Android and IOS in the mobile space, they now have to contend with their partners betting on the Chrome OS and having Intel back it big time. While I see Windows being strong in the enterprise for the foreseeable future, there are chinks in Microsoft armor when it comes to Windows with consumers and I think Intel’s backing of Chromebooks with their Core i3 processors will help these type of laptops gain more ground within education and consumers at Microsoft’s expense.