Follow us on TwitterMicrosoft Blames Linux Netbooks for Revenue Miss
Posted by Tom Greer on August 5, 2009 in Netbooks, Operating Systems
Microsoft Logo
LinuxWorld noted that, in the 10-K just filed with the Securities and Exchange Commission, Microsoft acknowledges Linux as a competitor on the client side (which is a first) saying:
Client faces strong competition from well-established companies with differing approaches to the PC market. Competing commercial software products, including variants of Unix, are supplied by competitors such as Apple, Canonical, and Red Hat. Apple takes an integrated approach to the PC experience and has made inroads in share, particularly in the U.S. and in the consumer segment. The Linux operating system, which is also derived from Unix and is available without payment under a General Public License, has gained some acceptance, especially in emerging markets, as competitive pressures lead OEMs to reduce costs and new, lower-price PC form-factors gain adoption. Partners such as Hewlett-Packard and Intel have been actively working with alternative Linux-based operating systems. Read the rest »
Microsoft’s Netbook Quandry
Posted by Tom Greer on August 1, 2009 in Netbook Market, Operating Systems
Windows 7
There is a lot of hubbub today about the Microsoft’s pricing plans for Windows 7 and the impact on the netbook market niche.
In a nutshell, Microsoft’s current plan is to have netbooks ship with a crippled version of Window 7 called the Starter Edition. Then to charge $80 to upgrade to the Home Premium Edition. With the typical purchase price of a netbook in the $300 – $400 range, this represent a 20% increase in the cost of a netbook.
To ensure that many netbook owners will be willing to fork over the the $80, Microsoft is crippling the Windows 7 Starter Edition by eliminating remote media streaming, changing desktop background and other “advanced” features.
Of course, netbook manufacturers can bypass all that by installing Windows 7 Home Premium at the factory. As a result, the list prices will rise by $50 or so.
We forecasted all this back in June in our article “Netbook Market: What Is Coming Next?“, where we said:
Acer to Release Android-Based Aspire One Next Quarter
Posted by Tom Greer on June 3, 2009 in Acer Netbooks, Operating Systems
Acer's Android-Based Netbook
Acer has announced at Computex 2009 that they will release a version of the popular Aspire One netbook configured with Google’s Android operating system.
Android is Google’s Linux-based operating system that was originally developed for smartphones.
What is interesting about this is that the first netbooks only ran on Linux. Then Microsoft woke up and virtually wiped out Linux-based netbooks by cutting the cost for XP licenses to near zero.
In recent weeks, there has been a lot of press around two new Linux-based operating systems. Google’s Andoid and Intel’s Moblin.
Although Acer’s first Andoid-based netbook will have an Intel Atom N270 CPU, the reason for a lot of the excitement surrounds netbooks in the wings that are not based on Intel chips.
There are a number of different netbooks in development that have CPUs based on ARM designs, like Nvidia’s Tegra that we highlighted a few days ago. ARM processors are currently used on many smartphones. These CPUs are attractive based on their low power consumption which provides long battery life.
Microsoft’s Windows operating systems will not run on ARM processors.
All this creates a real problem for Microsoft. The game plan for Microsoft is to migrate netbooks to the new Windows 7 operating system and to begin making money. Speculation is that their target is a $30 per netboook increase. That represents about a 10% price increase in the average netbook.
Microsoft will undoubtably respond in an effort to kill off this new competitive threat. Call me cynical, but they have not failed in the past, and there is no sign that this will play out any differently.
But, being a Linux fan, I’ll be cheering on the sideline for the underdogs.
2008 Trend: Netbook OS Linux to XP
Posted by Tom Greer on December 30, 2008 in Netbook Market
The Eee PC 2G Surf Was Introduced in January 2008
Back in January of this year, the netbooks available were almost exclusively Asus Eee PCs. In the beginning, they all ran Linux.
This trend worried Microsoft immensely. This little niche was gaining a lot of popularity. What would happen if customers found out that Linux could actually be used by normal people? With Vista already unpopular in many circles, there could be serious consequences if people learned that Linux actually provided the functionality that they needed. Read the rest »
ULPCs Long-Term Impact on Microsoft
Posted by Tom Greer on July 22, 2008 in Acer Netbooks, Asus Netbooks, Dell Netbooks, MSI Netbooks, Netbook Market
Last week, I published an article on how ULPCs were going to disrupt the entire PC industry. Since that time, I’ve taken a lot of grief from my friends. While we disagree on a number of points, the strongest disagreement is over the impact on Microsoft.
I have a number of Microsoft-fanboy friends who took special exception to my comment:
Microsoft’s low-cost XP licensing program for ULPCs is not a long-term fix for the company. It was like putting a band-aid on your skin cancer. It keeps the public from viewing the wound, but it doesn’t make the problem go away.
They believe that the XP Home for ULPCs offering will address the problem. They also took delight in the fact that notebookreview.com found that Vista ran faster than XP on an MSI Wind netbook.
They are missing the larger picture.
First off, the Windows XP for ULPC solution will work in the short-term to correct the problem that millions of netbooks were being shipped with Linux. Most will now ship with Windows XP Home edition.
But the limitations of the XP Home edition are the crux of the long-term problem for Microsoft. XP Home is crippled and will not work in enterprise network environments. Of course, you could upgrade to XP Professional, except Microsoft has killed that product. That leaves Vista, which as we have seen, can run (in a stripped-down mode) very well on a netbook. But buying a Vista license kills the low-cost aspect of the netbook.
How ULPCs will disrupt the entire PC industry
Posted by Tom Greer on July 14, 2008 in Acer Netbooks, Asus Netbooks, MSI Netbooks, Netbook Market
The Ultra Low-cost PC (ULPC) craze started with the One Laptop Per Child (OLPC) and Asus Eee PC products. These have forever revolutionized the low-end of the PC industry. Over the next several years, the impact will reverberate all the way to the top of the food chain, shaking the allocation of power and influence along the way.
ULPC Wave 1
You don’t believe me?
Consider this, mighty Microsoft suddenly awoke this spring to the fact that millions of PCs were shipping without *their* operating system. Those darling little Eee PCs and their friends were shipping with Linux. Worse yet, customers were happy! This forced Microsoft, in April, to extend the retirement of Windows XP exclusively for ULPC products. See what I mean?
Not only that, but Microsoft was forced to revise the program in June to cover a wider range of hardware including touchscreens, larger displays and disk drives. The program was expanded from mobile platforms (netbooks) to include desktops (nettops) as well.
Microsoft’s low-cost XP licensing program for ULPCs is not a long-term fix for the company. It was like putting a band-aid on your skin cancer. It keeps the public from viewing the wound, but it doesn’t make the problem go away.
ULPC Wave 2
Here is what happens next.
A group of Taiwanese electronics manufacturers will introduce the next wave of ULPC products. Unlike the current batches of ULPCs that have a toyish appearance, these second generation ULPCs are polished. Business travelers will fall in love with these and millions will be sold by the end of the year.
I’m talking about the MSI Wind, the Acer Aspire One and some new version of the Asus Eee PC. (Asus is struggling to find the right package of features, but they will field a competitive version very soon.)
These second-generation ULPCs will sell for around $500. They all will have 10 inch displays, keyboards big enough to support touch typing, 80 GB hard drives, speedier CPUs, plenty of RAM and batteries that last 4 hours or more. There will be Windows XP and Linux versions for all of these.
As I discussed in my recent post, business travelers will be enamored with these because they are so small and light. Most business travelers use their notebook computers primarily for email and attachments. Many will also drive a presentation to a projector from their computer. These new ULPCs are perfect for this.
Existing notebook computers will suddenly seem like luggables in comparison (they are at least double the weight). As a result, the existing notebook computer industry will be shaken. The existing players will all eventually respond with competitive products, but their business infrastructure is built around a different, higher-cost model. They will be forced to adapt or die. Some will, some won’t.
ULPC Waves 3+
Future waves of new ULPC models will move up the chain eventually encompassing high-end notebooks. In addition, nettops will begin to fill the low-end desktop market.
Consider, for example, that MSI has already demoed a desktop version of the Wind. For $300 or so, you get this tiny nettop appliance with:
- Windows XP
- 1GB RAM
- 160GB hard drive
- DVD drive
- Wi-Fi
These will probably be marketed to home users first. But these will do everything that a typical business user needs. It won’t be long before MSI or someone else markets a similar product to businesses.
Like Microsoft, Intel will attempt to limit the performance of nettops to prevent them from harming sales for the rest of its products. But the effectiveness of this will be limited, because AMD will have no reason to play along.
While the low cost of netbooks and nettops will be appealing to businesses, the reduced energy requirements will be attractive too. Imagine replacing a hundred or so old PCs in a call center with these Intel Atom-based systems. Besides less power to run the PCs, imagine how much cooler the call center will be.
Intel and Microsoft Affected As Well
What I have described so far would only appear to impact PC manufacturers. But the affect is much, much more profound than that. These changes will significantly impact Intel and Microsoft. Here is how.
The fundamental change here is that many consumers and business are realizing that they don’t need the latest Intel CPUs or Microsoft OS to get the job done.
Increasingly, users will find that these new products have all the processing power they need. They will be willing to abandon multiple core processors for less weight, less power consumption and longer battery life. Oh yeah, and less cost. Think about what that does to Intel’s business model.
But Intel has been dealing with Moore’s Law for years and will adapt. Microsoft, however, has a much more serious problem and history of being much less adaptable.
With the new low-cost program for XP, the lion’s share of the new ULPCs will ship with Windows. This will create the impression, in the short term, that Microsoft has beaten back the Linux monster.
But the new reality is that operating systems are now commodity products. For most users who need to surf the ‘net, do email, edit an occasional document, spreadsheet or presentation, their work can be performed equally well using a Microsoft, Apple or Linux OS.
This means that over time, Microsoft will be forced into more rounds of price cutting. At some point, Microsoft will need to restructure to lower their cost infrastructure.
Summary
The first wave of ULPCs (the EeePC and OLPC products) swept the world, the entire PC industry was impacted. Like an underwater earthquake, those in the PC industry felt the ground shake at the time and took notice. Now things are beginning to return to normal. But be on the lookout, the ULPC tsunami containing netbooks and nettops is coming.