On February 4, 2013, HP announced the addition of an HP Pavilion 14 Chromebook to its product family. Several business quarters have passed since the announcement, but, HP earnings reports (and the webcasts of management presentations), to the best of my knowledge, have not included notice of significant sales of this product line.

HP’s latest quarterly earnings report and Q1 2014 webcast is no exception. Beyond a mention of what sounded like “multi O/S” device sales, there was no mention of how HP’s Chromebook products contributed to their revenue performance.

But there’s little remaining doubt about the Chromebooks vs. Windows laptops & notebooks competition. Chromebooks are making themselves felt, but, I think, in lower end consumer sales in the Americas and Western Europe, and, across the board, in emerging markets.

On Saturday, February 22, 2014, Tom Warren wrote an article titled Microsoft combats Chromebooks by cutting Windows licensing fees by 70 percent, which was published on The Verge website. Warren writes: “Microsoft is reportedly cutting Windows 8.1 license costs by 70 percent for PC makers. Bloomberg News reports that the cuts are targeted at devices that retail for less than $250, in a move designed to combat rival low-cost tablets and Chromebooks” (quoted from Warren’s article, a link to which has been provided in this paragraph). It’s not likely Microsoft would move forward on a price cut for its Window O/S if sales of Chromebooks were still little more than a ding to their bottom line. But just where may this impact be occurring, if not in familiar enterprise IT markets?

On December 29, 2013, in an article titled Chromebook Sales Punching Through And Gobbling Market Share, Seth Colaner writes ” … the NPD Group has some startling numbers on commercial computing device sales. From January-November 2012, Chromebook channel sales were negligible at just 0.2% of the total market, but this year over those same months that percentage leapt to 9.6% of all computing devices. They also accounted for 21% of notebook sales. Much of Chromebooks’ success appears to be at the expense of Windows-based machines, which is likely due to a combination of a lukewarm response to Windows 8 and Chromebooks’ significantly lower prices.” Colaner also notes strong sales of Chromebooks on Amazon.com: ” two of the three top-selling laptops on Amazon.com this holiday season were Chromebooks–specifically units from Samsung and Acer.”

Investors may want to factor this information into their view of Microsoft, specifically, to conclude Chromebooks have, indeed, become a meaningful competitor to notebooks running the Microsoft Windows O/S. As to whether Microsoft’s decision to cut the cost of the O/S for its OEMs is good, or bad news, it’s too early to say. The price cuts may, in fact, shore up sales in emerging markets and the lower end of the consumer market, which would represent a win for Microsoft. After all, the Chromebook appears to already own 21% of notebook sales, per Mr. Colaner, right?

Disclosure: I’m long Microsoft, but neither invested in Google, nor any other publicly traded business mentioned in this post.

Ira Michael Blonder

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