Google (GOOG) recently announced the launch of the Chromebook. It’s a Samsung (SSNLF) or Acer (ASIYF) notebook loaded with its Chrome Web browser as a bare-bones operating system. Chromebook owners will access email and spreadsheets directly on the Web, rather than via such PC software as Microsoft Outlook or Word.
We believe that the Chromebook launch is directly aimed at Microsoft (MSFT), in the PC operating system and productivity software markets, as well as at Apple (AAPL), which uses its own operating systems for the popular Mac and iPad.
What’s at Risk for Microsoft?
According to our estimates, Microsoft derives about 75% of its stock value from its Windows operating system and Office suite of products, which shows how important it is for Microsoft to protect them. Although consumers and businesses have grown accustomed to using Microsoft’s products over the years, and more advanced programs need the support of a full operating system, the Chromebook seems like another shot across Microsoft’s bow, and a signal of Google’s intentions to push for greater adoption of a Web-based environment. In the short term, we expect its impact to be negligible for Microsoft, but Google could threaten its core businesses in the long term.
Google’s solution could be cheaper and faster, and enable users to avoid the annoyances of traditional PCs, such as long boot-up times, and the necessity of staying current on updates and new software.
We have a $29.66 price estimate for Microsoft stock, which is about 15% above market price.
Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.
Trefis is an online investment research platform targeted towards individual and professional investors. Trefis also includes a community of users that can create and share their models and analysis on trefis.com.