Netbooks running Linux may be returned more often than computers running Windows XP. But netbooks are the first class of consumer oriented computers where computer makers and retailers are regularly offering Linux as an alternative to Windows. It’s cheaper (as in, typically free), which helps keeps costs down. And it’s incredibly customizable, allowing companies like Dell or Acer to offer users a unique computing experience tailored for devices with small screens and relatively slow processors.

Bloomberg reports that about 30 percent of the netbooks sold by Acer and Asus, the current market leaders, run Linux. That’s huge, when you consider the fact that Windows controls about 90% of the personal computer market, and that netbooks currently represent the fastest growing segment of that market. According to Bloomberg, it’s one of the reasons that Microsoft’s revenue was below estimates last quarter.

Even if you don’t believe that Linux offers a viable alternative to Windows for many users, the fact that the earliest netbooks ran Linux pushed Microsoft into a corner where the company was forced to offer low cost Windows XP licenses to manufacturers as a way to keep Microsoft software competitive. So even now that there are more low cost ultraportables available with Windows than other operating systems, Microsoft is taking a hit by selling an operating system that’s close to a decade old at a discounted price instead of its newer Windows Vista operating system. Is it any wonder the company keeps talking about how well Windows 7 will run on netbooks?

The Bloomberg article also cites a number of industry observers who say that the netbook market will grow about 60% per year for the next few years, and that as many as 29 million units could be sold in 2010. Which sounds pretty good until you realize that these predictions are all based on a product class that didn’t even exist just a bit over a year ago. So I’m going to take this kind of analysis with a grain of salt for now.

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11 replies on “Are netbooks a threat to Microsoft?”

  1. I’m sure that Microsoft will have a version of Windows 7 will run on netbooks. (Will that mean even more versions of 7 than Vista???)

    The problem that Microsoft faces is that, in order to be competitive, they will need to keep the price down. That means a very slim margin. That hurts the profit line.

    To prevent users from purchasing the Netbook version and using it on other platforms, they will need to cripple it in some way. That is bound to upset some users.

    This puts Microsoft in a no-win situation. They know they can’t afford to give away Windows 7 to undermine Linux the way they did with Netscape et al. They have tried to create fear, uncertainty and doubt about Linux (via SCO and other proxies) with only marginal success.

    Perhaps this time they will try to compete on features and value. With Windows 7, will they offer users a better product for similar value?

    Somehow I doubt it. It is not in their character.

    1. Exactly right. If they price Windows 7 at the same $32 or less they are selling XP to the netbook makers now, it will make a heck of a ruckus unless they cripple it so much people will object to them even calling it Windows 7. And even if they get past that they are already feeling the hit to their bottom line from the loss in OEM licensing.

      Now consider that while Asus first promised $200 netbooks they (and everyone else) have found the greatest success in the $350-$550 segment. Once you get over about $400 bundling in an XP license makes sense, normal notebooks start at around the $500 pricepoint and they all have to price in a Vista license.

      But the focus is starting to swing back to the low end again, remember Asus promising a $200 machine next year? And there is this swarm of cheep Chinese machines that get talked about but haven’t quite made it to the US shores yet. Yet being the operative word. How does a vendor find a way to add $32 bux to the wholesale price for the Microsoft Tax and sell at retail for $150-$200? Answer: they can’t.

  2. Linux is nice but its very DIY. No matter what those annoying linux fanboys says, the majority of consumers use apps that are Microsoft specific. And by that i dont means “theres an open source alternative that does the same thing”, i mean the actual apps. Even people that dont return the linux ones might think twice before buying it again in the future

    1. I stopped using Microsoft products almost five years ago. Your criticism about Linux being DYI are quite dated. Today, installing and using Linux is flat out simple.

      Download the latest version of Ubuntu. You can install it from within Windows. You can test drive it without disabling Windows and uninstall it without any problems.

      If you have specific Windows applications that you expect to run within Linux, sure you will be disappointed. But for many applications there are different competitive apps that provide similar features. I find that OpenOffice handles Micorsoft Office files just fine, thank you.

      By the way, in my home I have a five-node MythTV network. All of my family’s DVR recordings get stored centrally, along with our movies from DVD, our music libraries and our pictures. I’ve had this setup for several years, long before Microsoft had a home server. So please don’t tell me that Linux is technologically challenged.

      I’ve also got an internal web server and a database server, plus some desktops and a few netbooks – all running Linux.

      Can you imagine the extra cost that I would have encountered if I had deployed all of this using Windows?

      1. You just proved my point, “provide similar features”. I can assure you that as a bachelor student in economics that open office shit doesnt do me any good whatsoever. While for you, and for me having used linux on occasions, installing stuff here and there might be simple. But for the majority of consumers, so called less involved consumers that dont spend their life online like we do, most of them dont even know wtf linux is let alone why they should care or spend time learning. That is the common consumer, not the people on lilputing or other sites. They make up the huge sales numbers but people online tend to think everyone know stuff and find things to be just as easy as it is for them., Take a person that knows very little tech, calulate the times it takes for the person to learn a new OS and im sure you wont get many that wont pay the extra $20 for windows. Sinc e i was referring to the majority of consumers, your setup (and mine for that matter) has no relevance in the equation

        1. What features OpenOffice can’t provide which MS Office can? I’ve been using OpenOffice for ages and apart from the new fancy useless gui of MS, it’s totally fine. Me, as an economics-computer science vocational school graduee and 6 months to graduate as English and Applied linguistics major.

        2. I don’t know what program you’d need for a bachelor in economics that there aren’t alternatives for in Linux. I’ve been there, done that and I remembered not needing a computer at all when I was doing my undergrad.

          1. I dont know where or in what century you took yours, but over here you really need a computer. As for OO, heck even the english version some people had of excel gave them problems since some advanced shit we learned in excel wasnt named the same as what we were shown. Still only proves my point that you linux fanboys continue to nag non stop about how good linux is and have fully ignore what i said about the AVERAGE CONSUMER. Stop trying to prove your little hobby matters in the big scheme, fine you like open source, windows has 90% world share for a reason – other people dont care. So pelase stop nagging about alternatives and linux being teh pwns and windows being teh noobs, it’s not like whats technically best always wins

        3. I’m happy to assist you in proving your point. Let me say it clearly. For the most part, Windows applications won’t run natively on Linux.

          But *you* are missing the point. In this Internet-centric world, PC-based applications are less and less important. Even Microsoft now understands that “cloud” computing is the future.

          In cloud computing, server-based applications run in a browser. The operating system on the client is a complete non-factor.

          Not everyone has the same requirements for their netbook as you do. For many, a netbook running Linux contains everything they will ever need. They will surf the net, send/receive email, open and edit attachments, etc. without ever needing to add applications that come with the system.

          In fact, for many they will use a netbook like a cell phone. It’s a pre-configured appliance that is used as configured – – and replaced in a couple of years with something better.

  3. Microsoft should be scared. They have dropped the ball on Vista and have gotten people to experience with alternatives.

    Netbooks and Linux are made for each other and is an excellent way to promote Linux. Most people, myself included, were willing to try Linux for the first time due to the restraint of the Atom processor and the limited space SSD on most netbooks.

    Netbooks allowed me to reevaluate my computer use and realized that I don’t need a 2GHz Core 2 Duo machine for multi-tab web browsing, watching online video, and reading ebooks. And Linux (Ubuntu), got me to realize I’m not obligated to Windows. Ubuntu has been a blast. It’s extremely easy to use, much more intuitive than XP. It is much faster than XP, and definitely Vista. The repository of free software is awesome, none of the junks you find at that you needed to crack. Everything is available for free and is extreme well built. And fortunately for me, there isn’t any must have program that I need on XP. I made the switch and will never look back.

    And I also learn of one more thing when I made the switch. That is, I spent way too much time on XP maintaining it. Windows is very high maintenance. I spent most of my time running programs like ccleaner, winxp manager, ashampoo, defrag disk, and registry cleaner. I also spent way too much resources on anti-virus and firewall. On Ubuntu I have a lot more time to do work.

    And another reason for my switch. XP is very stable, but it is also an 8 year old OS. I’m bored to death with it. Vista is a failure. It is unappealing to me both in appearance and performance. Ubuntu, on the other hand, is updated every six months, by that count its latest version is a newborn.

    And lastly, Microsoft is evil. It predatory way of doing business and despicable. Linux, Ubuntu, and the free software community’s philosophy is admirable.

  4. Why is it the MSI story got so much play yet when Asus CEO Jerry Shen said that they didnt have the same problem it got none?
    Who do you listen to usually, the market leader or the also ran?

    >as many as 29 million units could be sold in 2010.
    Im impressed. Even more so when tech media like CNET are still calling the netbooks a fad (those are the same people who keep telling us the same thing about the Wii)

    >t 30 percent of the netbooks sold by Acer and Asus, the current market leaders, run >Linux. That’s huge

    If you had told me a little more than a year ago that Linux would be found in 30% of certain segment of the computer/laptop market with little advertising, support or even competent/unbias sales staff, I would have asked to take a puff from you.

    As someone who has an Acer1 w/ linux, I can honestly say that the ‘linux is too hard to use’ myth has officially been busted.

    Web apps on le cloud and netbooks are making OS moot.
    As a geek who has played with computers ever since my first 286, I find this a bit sad but lets face it, most people do the same 4-5 things on a computer, they want somethnig that works and that is cheap. The internet will be accessed by our stoves and microwaves soon on top of our phones, wii’s and cars and embedded will rule.

    The netbooks are a first sign of the web 3.0 shift that is directly impacting computing.

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