The real threat to Apple
Commentary: Google’s Chromebook could upend the tech economy
new
March 13, 2013, 12:39 p.m. EDT
By Brett Arends
For the past few weeks, I’ve been using a lightweight laptop made by Samsung called the Google Chromebook.
And it’s serious trouble for everyone in the tech business — including Google
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and Samsung , I suspect.
The Chromebook has had surprisingly little attention since it was
launched. I came across it while searching online (through Google, of
course). This product does enough to meet the casual computing needs of
many users. And it is surely just the next stage in an escalating price
war.
No, I can’t use it for advanced gaming, editing movies, or hacking into
the Pentagon. But it’s just fine for email, writing, editing documents,
and using the Internet. It runs on flash memory. It weighs a little over
two pounds, and the battery life is about eight hours. Unlike some
previous “netbooks,” it has a decent-size screen — nearly 12 inches —
and a proper-size keyboard. In design, at least, it looks a lot like a
MacBook Air, a product for which Apple
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charges $1,000.
The trouble? This thing costs just $250. That’s half the cost of an
iPad. It’s cheaper than an iPad Mini. And about the same as a Nexus
tablet running Android.
That’s great for you and me. It’s not great for the companies in the
industry — or their stockholders. Back when the Cold War was at its
height, strategists and critics highlighted the concept of mutually
assured destruction, or MAD — the idea that no one could win a nuclear
war.
The computer business is now in a MAD state. All the players could lose.
Some people buy an iPad because they want a beautiful touchscreen
product that lets them surf Facebook, watch movies and play Angry Birds
while sitting on a sofa. They’ll probably stick with an iPad. But others
just buy an iPad — or equivalent tablet — because they want a
lightweight computer they can throw in a briefcase or flight bag and
that allows them to get online and do work on the road. Products like
the Chromebook are going to undercut that business.
I’m sure other companies are going to come up with competing products.
Presumably they will have to to stay “in the game.” Products will be
given away for the cost of production, or less. Apple will still be able
to charge a premium for its products, but it will lose what economists
call the marginal consumer. So will Microsoft. The Chromebook doesn’t
even use Windows, let alone Microsoft Office. Everything goes through
Google Documents. (You don’t need to buy virus protection either. This
thing was $250, all in.)
Maybe that makes me a captive of Google, but so what? I have to use
someone’s operating system. I generally assume there is no privacy on
the Internet anyway.
Google just unveiled a Chromebook called the Pixel. It’s supposed to be
the high-end version. It costs $1,300, much like an Apple. Maybe it will
succeed. But I have my doubts.
Meanwhile, at the cheap end, things are just going to get cheaper and
cheaper. Five years ago, iPhones were too cool for school. Now Virgin
Mobile has them on prepaid. Cricket can’t even unload its inventory. Two
years ago, the iPad was the most amazing product in the history of the
universe. Now everybody has a tablet.
Wall Street remains in love with technology. Apple, Microsoft, Google
and Samsung between them are today valued at well above $1 trillion.
That’s the perceived present value of all the profits Wall Street
expects in the future. The analysts, of course, predict that each
company will be a winner.
We’ll see.
Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.
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