PC sales continue to drop while Chromebook sales rise. Is Microsoft in trouble?

August 13, 2014
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Chromebooks Alive PC dead

Microsoft, once the mightiest technology company to walk the earth, has seen some hard times of late, including mounting losses in their Surface tablet/laptop division. On the other hand, manufacturers of the highly portable, laptop form-factor, Chromebook are doing fairly well for themselves.

This is not the first time we’ve reported the growing successes of the very affordable, web focused, Google powered Chrome OS platform, including Chromebooks, Chromeboxes and a few other form factors as well. This is also not the first time we’ve seen that PCs, including laptop and desktop computers, are on the decline. (Even though Microsoft’s Surface is a tablet, it is generally regarded still as a laptop computer.) Despite growing losses, some are of the opinion that Microsoft has an end game here, something that makes the Surface Pro worth while.

Surface Pro

Looking at the numbers, ComputerWorld has determined that Microsoft’s Surface division has wracked up over $1.7 billion in operating losses on the Surface line of tablet/laptop devices. As this number was generated by comparing revenue against cost of revenue, expenses such as advertising are not even included. Surely, with these sorts of losses, and the changes to company focus under Satya Nadella’s leadership, it is time to scrap the Surface line?

While most companies might scrap a project that is nearly $2 billion in the hole, Microsoft may have other ideas. Plainly put, Microsoft has reportedly committed to seeing the Surface project through to an end, they also are large enough to handle, and have a proven track record for accepting, mounting losses on a project to reach their goals. Take Bing for example, which has been around for several years now, but which is only on track to break even and begin turning a profit sometime in 2016.

Is the Chromebook too big an obstacle to overcome?

chromebook Pixel Branding 1600 aa

While Microsoft has been floundering, their normal hardware partners have been finding a new home with Google, running the free operating system Chrome OS. Chromebooks, which are primarily lightweight laptops running Chrome OS, have been working their way into the hands of many. Reportedly shipping over 1 million units in the last quarter alone, placing them well on track to outperform their 2013 sales record of 2.1 million units.

The Chromebook market last year overwhelmingly belonged to Samsung, taking nearly 65 percent of all sales. Acer clocked in at a little over 21 percent, while HP and Lenovo both took home just under 7 percent each. Of these sales, Business Insider reports that 85 percent went to the education sector, and a whopping 82 percent of all Chromebook sales were within North America.

Google-IO-2013-Google Play Education 1600 aa

Set to eclipse the Chromebook sales numbers of 2013, the research firm Gartner predicts that Chromebooks will reach sales up to 14.4 million units by 2017.

The main competitive edge to the Chromebook is its low price tag, but the real value goes beyond the hardware. Consumers are only still getting comfortable with, and understanding the value of, cloud-based architecture, and realizing that they need to spend less time managing devices and more time managing their business and data.

Side by side

While Microsoft took to lowering the price on their first generation Surface RT to just $349, a typical WiFi only Chromebook has always ran in the $200 – $250 range. For the same $349, users can expect the latest Chromebook with mobile data and usually a few hundred MB of free data every month for the life of the machine.

Stepping things up, the Microsoft Surface Pro line has always demanded prices of $700-$800 or more. While Google offers their own branded high-end developer model, Chromebook Pixel, for as much as $1500, this is a single offering, a specialty unit with an unnaturally high price tag. You might say the high price of the Pixel is somewhat the same as Google Glass maintaining its $1500 price tag, except the Pixel costs a little more than $80 to build.

nexus 10 vs microsoft surface

We pitted the original Surface tablet, with its 10-inch display, up against the Nexus 10 a while ago. The results were a bit of a toss up depending on what you need out of your computing experience. Using that baseline, the average Chromebook has a larger display, at 11.6-inches, and much the same specifications otherwise. The benefit to the Chromebook is that Chrome OS is little more than the Chrome browser, as a loose description. The performance overhead and required maintenance of running the full Windows operating system is another beast.

Processors and mobile

While the vast majority of PCs around the globe are powered by an Intel processor, it is important that we, and Microsoft, realize that Intel has made a major shift toward mobile. Intel enjoyed the ride with Microsoft, which has only placed them in a catch-up situation as vendors like Qualcomm, MediaTek and even NVIDIA have shot to stardom developing chipsets on the ARM architecture for Android devices.

64-bit Tegra K1 processor with Denver chip

As ARM architecture requires fewer transistors than the typical x86 architecture used by Microsoft’s systems, Android and other ‘mobile’ devices cost less to build, create less heat and require less power to operate. In fact, mobile technology and the success of ARM processor architecture is deemed responsible for Intel’s 25% net income drop in Q1 of 2013 en-route to total 2013 net income drop of nearly $1.5 billion from 2012.

Intel’s mobile shift has seen to the use of their processors, specifically their lowest end Celeron line, in many Chromebooks. This very article is being written on an Intel Celeron powered HP Chromebook. It is also possible to find a good selection of Chromebooks running on Samsung’s Exynos processor, proving Intel still has some ground to cover to acquire the sort of market dominance they previous enjoyed with Microsoft.

Nokia X -18

Intel is not alone in their shift to mobile. Microsoft took a serious leap into the game by purchasing Nokia’s hardware division last year. Armed with the world’s former largest handset manufacturer, Microsoft has been throwing new phones at various markets around the globe. There was an Android device, called the Nokia X, that was considered a budget device, at best, but Microsoft ultimately put the axe on future Android devices, instead focusing on pushing Windows powered phones.

Having failed thus far to regain any of their former glory, Microsoft’s Nokia has even taken to pumping out devices for as low as $25. The Nokia 130 is purposed for developing nations and areas that are relatively untouched by smartphone technology, but we wonder how far this ‘smartphone’ will take a person, considering it does not come with a network connection.

Conclusions

There are certainly important use-cases that benefit from traditional PCs, more specifically, from Windows OS. However, as the average consumer is spending more and more time in the browser anyway, using Google’s suite of office productivity programs, the Chromebook is proving the more cost effective solution in many situations, especially for education and personal home use.

hp-chromebook-11

The future of PCs and Chromebooks is completely in your hands, we must all decide where to place our hard earned dollars when we next go computer shopping. PCs offer a certain amount of familiarity and a large amount of history and applications support. Chromebooks offer a portability, a freedom and flexibility that many of us are rapidly becoming more familiar with from our mobile computing experiences.

Do you have a PC purchase in your near future, or are you comfortable transitioning to mobile devices and the newer computing concept of the Chromebook?

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