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Could Android netbooks hurt Microsoft?

February 23, 2009 | by Andrew Kameka

Android, Netbooks

Could Android netbooks hurt Microsoft?

Microsoft is clearly not a fan of Google Android. Aside from the hot ticket Android stealing some Windows Mobile shine and market share, Android may even cut into Microsoft’s stronghold on computer operating systems. Make no mistake about it: Microsoft is King of Computers and will stay that way for quite some time. After all, XP or Vista is the operating system on 90 percent of all PC’s. However, the promise by several manufacturers to develop netbooks running on Android’s operating system could put a dent in Microsoft’s bottom line. Microsoft will retain the PC crown for quite some time, but Android gaining traction on netbooks could affect the company’s long-term comfort level for three important reasons.

1) Android will be Another Apple to cut

Microsoft has done well to stave off the rise of Linux, which Android is built upon, but among younger consumers, longtime rival Apple is gaining ground. Prior to recent economic troubles, Mac sales outpaced Windows PC’s. The number of Mac fans at college campuses, media studios, and tech conventions has shown that OS X is gaining on Vista. A significant increase in Android systems could be an effective annoyance to Microsoft from a business standpoint. Though Linux hasn’t put a dent in their business model, Android has enough brand recognition through Google and intrigue from manufacturers to cut into Microsoft’s market share. As if those PC vs. Mac adds weren’t annoying enough.

2) Some netbook makers may leave Microsoft behind

We’ve already seen that Android is more than a mobile phone platform thanks to Mobile Internet Devices (MID’s) like the Giinii Movit. This past week, Asus and Freescale pushed that envelope further and announced their plans to build netbooks on the Android platform. Netbooks tripled in sales last year, and according to a PC Pro report, sales are expected to top 50 million by 2012. That could spell trouble for a company that has become practically the only operating system that matters to a huge portion of the population. As more consumers look for something portable, simple, and low-cost in netbooks, Microsoft needs to continue that familiarity. (CEO Steve Ballmer says Microsoft has an 80% share of netbook sales). Microsoft thrives off consumer belief that other operating systems competing with it aren’t up to par. Name recognition won’t matter much if netbook makers can take advantage of Android’s buzz and customization options.

Android running on an HP 2133. More development will be necessary for a full-fledged netbook.

3) Money rules the world, but not netbooks

Microsoft, like any other business, wants to make money. It will make lots of it, but a little less if Android netbooks prove profitable. Since Google does not charge licensing fees and Microsoft does, a successful Android netbook from Asus may cause other companies to follow suit in order to increase their profit margin. Not to mention the effect this will have on consumers. I took a trip to Best Buy recently and decided to look at available laptops on my way out. I saw a Sony Vaio running Vista for $900, a Dell for $800, and an Asus Eee PC for $400. Cheaper netbook computers — Freescale suggests as low as $199 — will be very enticing for deal hunters. Microsoft may have name recognition, but with a salesperson reminding shoppers about Android’s affiliation with Google, it’s safe to assume that people may be willing to give one of the world’s most recognizable brands a chance. Netbooks don’t generate as much revenue as a laptop, so how competitive can Microsoft be against a $200 Android-powered netbook? The shift to MID’s, netbooks, and other portable devices makes Microsoft ever mindful that they must continue to be the name that buyers favor.

Conclusion

Microsoft’s saving grace will be its entrenchment in the PC market. The company has years of dominance to sustain challenges from an upstart operating system, even if it’s from Google. But that doesn’t mean it can rest easy once the Android bot marches into stores and homes. A rise in Android-powered netbooks would affect that dominance in the long run. Regardless of how small the threat may seem for the foreseeable future, Android may be bad for business at Microsoft.