Google's latest threat to Microsoft

Google Inc's free operating system "Android" that is used in phones will begin running computers next quarter, entering a market dominated by Microsoft's Windows and deepening the rivalry between the two software giants.

Acer Inc., the world’s second-largest laptop maker, will release a low-cost notebook powered by Android next quarter, Jim Wong, head of information-technology products at the Taipei- based company, said yesterday. Asustek Computer Inc., pioneer of the sub-$500 laptops known as netbooks, also has developed a model that runs on Google’s software, Chairman Jonney Shih said.

The adoption of Android-based netbooks may eat into Windows’s share of about 90 percent worldwide for personal- computer operating systems. Google’s move escalates pressure on Microsoft as it prepares to introduce Windows 7, said Calvin Huang, an analyst at Daiwa Securities Group Inc.

“This is a negative and may force Microsoft to lower the price of Windows 7,” said Huang, who covers the computer industry from Taipei. “More and more vendors are adopting Android and non-Windows in their products, so this is a very good chance for Android to penetrate the PC market.”

Acer’s Android-based Aspire One netbook will be cheaper than the Windows XP model, though the two products will have the same electronic components, such as Intel Corp.’s Atom processor, Acer’s Wong said.

Right to Choose

“Competition in the marketplace is good and people have the right to choose software that is best for them,” Amelia Agrawal, a Singapore-based spokeswoman for Microsoft, said in an e-mailed statement. “Microsoft remains confident that people will keep buying Windows, as evidenced by the robust Windows growth on small notebook PCs.”

Mountain View, California-based Google added 0.4 percent to close at $428.40 in Nasdaq Stock Market trading yesterday. Microsoft was unchanged at $21.40.

Google introduced Android in 2007 as a software system for mobile phones. Android is based on Linux, an open-source operating system that’s free and developed by hundreds of engineers worldwide. Asustek said in February its engineers were trying to develop an Android-based netbook this year.

“Anyone can take the Android platform and add code or download it to create a mobile device without restrictions,” Google said in an e-mail. “We look forward to seeing what contributions are made and how an open platform spurs innovation.”

Microsoft’s Bing

Microsoft also is challenging Google’s main business. Last week, the Redmond, Washington-based company unveiled Bing, an Internet search engine designed to compete against Google’s.

Asustek released the Eee PC netbook in October 2007, initially only offering Linux software. Microsoft jumped into the market and was able to grab 85 percent of mini-notebook sales by the fourth quarter of 2008, according to estimates at research firm Gartner Inc. Linux accounted for the rest.

“Google really does have the brand name and the financial resources to be able to be a rival to Microsoft,” Warren East, chief executive officer of chip designer ARM Holdings Plc, said in an interview yesterday. “The whole Linux community is a bit fragmented when you compare it with Microsoft.”

ARM Chips

ARM, based in Cambridge, England, is a potential beneficiary of Android’s success because Microsoft’s Windows XP, Vista and Windows 7 don’t run on ARM-based computers.

“Microsoft going forward may have to work on an ARM-based solution,” said Daiwa’s Huang. “If Microsoft doesn’t want to see Google Android get into the PC market, they will have to support ARM; otherwise, ARM will go perfectly with Android.”

Qualcomm Inc. and Freescale Semiconductor Inc., which make chips based on ARM’s technology, said they expect to release products this year for netbooks that run Google’s operating system.

Google’s cachet will help get the computers into retailers such as Best Buy Inc. or France’s Fnac electronics chain, said Henri Richard, chief sales and marketing officer for Freescale.

“It’s important to be able to convince Fnac or Best Buy to put a product on their shelf, and that’s where I think Android is going to be more helpful,” Richard said in an interview.