PC makers move closer to a post-Windows world

October 29, 2008: 8:16 AM ET
The Linux version of the HP Mini 1000 will sell for $379 when it arrives in January. While the laptop itself won't sink Microsoft, it's one more example of how powerful PC companies are relying less on Windows, and doing more software themselves. Image: HP

In January, Hewlett-Packard will introduce a glossy black mini-laptop at retail for a mere $379. When it does, it will become the first major computer maker this decade (besides Apple, of course) to push a non-Windows PC in stores.

This Linux-based version of the HP Mini 1000 will not slay Microsoft (MSFT) Windows. But it will add to a growing sense that the iconic operating system's best days are behind it.

Since we first began to fall in love with the personal computer -- before we met YouTube and Google (GOOG), cable and DSL -- Microsoft Windows has pretty much run the show. We've become so accustomed to our Microsoft-controlled existence that jokes about the Start menu and the Blue Screen of Death have become part of our national conversation. That's the genius of Apple's (AAPL) hilariously mean Mac vs. PC commercials; as viewers, we connect with the message about the portly PC guy because we feel like we know him. In a way, we do -- we've lived with him in the den or the home office for decades now.

Today, evidence is mounting that Microsoft's dominance in computing isn't what it used to be. It's not just the Windows Vista flop and those damning commercials, either: Apple's Mac OS is gradually taking share from Windows; and HP (HPQ) and Dell (DELL), the world's largest PC makers, are investing in bigger homegrown software teams to do work they once left to Microsoft. Look at the high-growth computing markets for smartphones and low-cost mini-laptops, and the shift is even more striking; the most popular smartphones from Research in Motion (RIMM) and Apple of course don't run Windows, and more than 35% of today's mini-laptops run a non-Windows operating system.

Consider the Linux-based version of the HP Mini 1000. The product itself is no threat to Windows; HP says it plans to price it just $20 below the Windows XP version, which isn't nearly cheap enough to make it worth giving up compatibility with Windows programs. But more significant is the signal the product sends -- that HP doesn't need Microsoft quite so much anymore.

"If you look at some of the most successful products in the electronics industry, software plays a tremendous part," said Kevin Frost, general manager of consumer notebooks at HP. He was quick to point out that HP's embrace of Linux shouldn't be interpreted as a slap at Microsoft; he said he expects the "vast majority" of HP's mini laptop sales to be the Windows version. "But we frankly view the mini category as one where we have the opportunity to put the focus on the HP brand, not the processor and not the operating system."

The HP mini laptop's customized look and feel is the labor of the Experience team in HP's Personal Systems Group, which is working to make its products feel simpler and more intuitive than the industry-standard Windows-based PCs. Two-thirds of the members of the team focus on software. "This is an area you traditionally would not think of us as being in," said Phil McKinney, chief technology officer in HP's Personal Systems Group. "You think of us as, bend metal, drop processors in, load Microsoft bits, crank the price down." But the software-heavy Experience team, he says, "is quickly becoming one of the single largest investment areas from an R&D spending perspective."

Dell's doing it, too. Its lowest-priced Linux-based Inspiron Mini 9 is $349, and uses the same 1.6-gigahertz Intel (INTC) Atom processor that HP's will. The Dell's screen is an inch smaller than HP's at about 9 inches, but it's available now.

"This is the part of the Windows Vista backlash that really matters," said IDC analyst Richard Shim, who had recently seen HP's Linux mini-laptop. It's especially notable, he said, that HP and Dell are experimenting with highly visible non-Windows options. "There aren't that many companies that can afford to invest in this type of development," and those two are among them.

Ten years ago, such software experimentation was practically unheard of. PC makers (called original equipment manufacturers, or OEMs in industry parlance) bowed to Microsoft's demands and Microsoft executives mused openly about a world with Windows everywhere -- in cars, clothes, kitchens and living rooms. "Microsoft had absolute control. A few of the OEMs had tried to do some unique things, and they had been slapped down," recalled industry analyst Rob Enderle. Packard Bell, Enderle notes, tried to customize some things in Windows. Microsoft wasn't happy, and the project went away. "The computer makers were scared to death of them," said Enderle.

Not anymore. Now when industry insiders share their fears and ambitions, they're more likely to mention the iPhone. Apple may be small, but it has shown the computing world the way to happier customers and fatter profit margins: Roll (some of) your own software. Even Intel is doing it. Rather than look primarily to Microsoft for the software to flesh out its vision for handheld Internet devices that will use its Atom chip, the giant has invested in Linux. Why? Because Linux is free software and anyone can tweak the code, and Intel can make sure Atom devices with Linux are specially tuned to conserve battery life, said Anand Chandrasekher, general manager of Intel's Ultra Mobility Group.

None of this should suggest that Microsoft is in some death spiral. Windows still appears on nine out of 10 PCs that ship today, and practically mints money for its parent company; last quarter the Windows Client division turned in $4.2 billion in sales, up slightly from a year ago. Though in its most recent earnings call last week Microsoft cited the mini-laptop trend as a reason why Windows revenues were lower than expected, a spokeswoman notes that more of the devices are shipping with Windows.

Microsoft also has more than $20 billion in the bank, placing it among the richest in tech, and it's one of the few companies that spends a significant chunk of change ($8 billion last year) researching the technologies of the future.

So Microsoft isn't going away, by any stretch of the imagination. This week at its Professional Developer Conference in Los Angeles, the company is outlining plans for Windows Azure and Windows 7, two operating systems that adapt to a world that's moving away from the old PC toward software delivered over the Internet, on new kinds of devices.

As that world arrives, Microsoft would be wise to continue embracing the idea that it's no longer the master of the software universe. To paraphrase the opening line of Fareed Zakaria's bestseller, The Post-American World: This is not about the decline of Microsoft, but rather the rise of everyone else.

Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.