Business and Management

Standard Level
Internal Assessment
How should Google position its Chrome OS against Microsoft’ s
Windows 7 to gain market share of Netbooks?

Candidate Name: Ashish Tayal

Candidate Number: 002272-091

Session: May 2010

Word Count: 1,494

002272-091 May 2010

Contents

Introduction...........................................................................................................................................3

Possible Marketing Strategies................................................................................................................5

Boston Matrix........................................................................................................................................6

Conclusion.............................................................................................................................................8

Bibliography..........................................................................................................................................9

Appendix 1...........................................................................................................................................10

Introducing the Google Chrome OS.....................................................................................................12

Something to Chrome about...............................................................................................................15

The Netbook Effect: How Cheap Little Laptops Hit the Big Time .........................................................19

Microsoft launches Windows 7, eyes PC sales rebound......................................................................26

Appendix 2...........................................................................................................................................28

Company Background..........................................................................................................................28

Introduction...........................................................................................................................................3

Possible Marketing Strategies...............................................................................................................5

Product positioning Map.......................................................................................................................5

Boston Matrix........................................................................................................................................6

Conclusion.............................................................................................................................................8

Bibliography...........................................................................................................................................9

Appendix 1...........................................................................................................................................10

Google's new operating system to take on Microsoft.........................................................................10

Introducing the Google Chrome OS.....................................................................................................12

Something to Chrome about...............................................................................................................15

The Netbook Effect: How Cheap Little Laptops Hit the Big Time .........................................................19

Microsoft launches Windows 7, eyes PC sales rebound......................................................................26

Appendix 2...........................................................................................................................................28

Company Background..........................................................................................................................28

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Introduction
I will try to find “How Google should position its ‘Chrome OS’ to compete with
Windows 7 and to gain market share of Netbooks operating systems”

Netbooks represent the future of PC sales developing economies like India, China and SE-
Asia.

North America, Europe and Australia currently have maximum internet penetration rate,
however the population of these geographies is either static or decreasingg. Thereforeand,
increasing the sales of the PC slaes’s is becoming more challenging in these countriesfor the
companies. Netbooks will bring about an important change in the personal computing as
slowly PC makers are now focusing on Netbooks as their main products for business growth1.

Netbooks are new generation small, light weight, economical, low endlow-end personal
computers. Netbooks They have been gaining market share of the overall PC market rapidly2
since its launch in mid 2007. Netbooks presently comes with preinstalled with Windows XP
or Linux based operating systems.

1
Refer to “the nebook effect” in Appendix

2
Web article on Netbooks in Appendix

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Google has recently announced its plans to launch a next generation, light operating
system “Chrome OS” around mid 20103. It aims to help its users connect to the
internetInternet faster. Microsoft too plans to have a separate low endlow-end version of their
OS, Windows 7, for Netbooks.

Google claims to have redesigned its operating systems right from the very fundamentals to
adapt to the era of the internetInternet. As per Google, it believes that “the operating systems
that browsers run on were designed in an era where there was no web” 4. Research has shown
that users can perform close to 95% of their everyday tasks on a browser 5 using the free
office suites and software available online. The chrome OS is initially planned as an
extension of the Chrome browser with an additional windowing system based on a Linux
kernel6. “Speed, Simplicity and Security are the key aspects of Google Chrome OS7”. .

Netbooks are currently priced close to the $400 mark. Though initially planned for people of
lower income groups in the Asian countries, Netbooks quickly became popular in developed
countries like US and Europe. Netbooks have gained about 7% of the overall laptop market
and expected to gain close to 12% of the market by the end of 20098.

The price of Windows 7 is likely to be much higher than that of Google Chrome. Considering
that Chrome OS is announced to be an open source project 9, it may also be available for free
download or priced quite cheaply (penetration pricing may be used as a pricing strategy).
Price would play an integral part in the marketing mix of the operating systems as for users
with tasks of basic natures, price would be main differentiator.

3
Mint article in appendix
4
Refer to “Introducing the Chrome OS” in appendix
5
Refer to “ The netbook effect” in Appendix

6
The 'kernel' is the central component of most computer operating systems; it is a bridge between
applications and the actual data processing done at the hardware level. The kernel's responsibilities
include managing the system's resources (the communication between hardware and
software components
7
Refer to “Introducing the Chrome OS” appendix
8
Refer to “Wired magazine articleThe net book effect” in appendix
9
Open source meaning that its code is available to the public for being edited.

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Google’s decision to create an operating system for Netbooks is a strategy to tap the potential
of high volume fast growing Netbooks market and later penetrate into operating systems of
larger PCs.

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Possible Marketing Strategies

Product positioning Map

By looking at the product- positioning map, we see that Microsoft’s products are placed in
the relatively High-Price region, while the Mac OS is priced the highest. There are already
many products in the high price category therefore it will be quite a competitive area for
Google to enter. Moreover Google has provided its services to customers for free and
established a brand image of a free services provider; this implies that customers may feel
hesitant to pay Google for its software.

The price of Windows 7 is likely to be much higher than that of Google Chrome. Considering
that Chrome OS is announced asto be an open source project10, it may also be available for
free download or priced quite cheaply (penetration pricing may be used as a pricing strategy).
Price would play an integral part in the marketing mix of the operating systems as for users
with tasks of basic natures, price would be the main product differentiator.

In terms of price we see that Windows 7 is priced relatively lower than what Windows Vista
was priced at its launch. Microsoft used a competitive penetration pricing strategy11, by
allowing its present Vista and XP users to upgrade to Windows 7 for relatively low price 12.
Microsoft is likely to get its existing XP Netbook users to purchase Windows 7, thus
enteringpenetrating the market easily than relying on the sales of new hardware. This pricing

10
Open source meaning that its code is available to the public for being edited.
11
Peneetration pricing is to price the products lower than that of the competitiors in order to increase the
sales volume of the product.

12
Refer to “Microsoft launches Windows 7, eyes PC sales rebound” in appendix.

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strategyCompetitive pricing would allow Microsoft to gain market share easily and see a
large sales volume in the initial months of its launch as people presently using windows XP
on their Netbooks would be tempted to switch to windows 7 for a smallcheaper price. .

Even though the total sales volume generated by Google chrome may be more than that of the
Microsoft Windows 7, the total revenue generated would still be lower than Microsoft
because of Google’s lower per product revenue13.

On the performance scale, ‘Mac OS’ is clearly the highest, followed by the Linux based
operating systems. Windows 7 is by far technically the most advanced of the Windows
family, however the Netbook version of Windows 7 has limited functionality than its other
versions (such as the home premium and professional). The On the performance scale the
Netbook version would be placed in the middle, close toof its predecessors XP and Vista
therefore purchasers of Netbook Windows 7 would not have a large edge technically over
its competitors. This is a challenge for Microsoft and Google can use this as a potential
market gap. Google Chrome OS has to be better than the Windows XP and Windows 7
Nnetbook varriantsvariantsfamilies. Initially the Google Chrome OS may have program
compatibility issue, but it can be resolved gradually as the OS gains popularity.

Considering Google’s track record of innovation, it is expected to produce technically

advance product that fulfills the requirements of a Netbook user effectively.

13
Based on the fact that

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Boston Matrix
Market Share

High Low

Market High (Windows 7) Windows Vista

Growth
Low Windows XP

On the Boston matrix, Windows Vista has moved from a Dog Product 14 at its launch to a
Problem Child15 as Windows XP has been phased out for regular PC’s andnotebooks
consumers have no choice but to purchase regular PC’sthem with Windows Vista. However
has Microsoft has decided to use an extension strategy16 for Windows XP by allowing sales to
continue only for Netbooks; prior to launch of Vista, XP was a star product after the
extension strategy was implemented it has moved it into the Cash-cow stage.17

Microsoft plans to replace Windows Vista, which has entered stage of maturity in the product
life cycle, with Windows 7.

14
Low Market Growth and Low Market Share

15
High Market Growth and Low Market Share

16
An extension strategy increases the sales of product for a temporary period of time, it is used for products
which towards the end of the maturity phase in order to prevent their products from going into a decline
phase.

17
Low Market Growth and High Market Share

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From the analysis of Microsoft’s product portfolio it is evident that the business has high
expectations on Windows 7 to generate revenue for itthe business and recover the damages
caused by the failure windows vista. Windows Microsoft cannot rely on the sales of
Netbooks alone as due to their low price the revenue generated from each sale is low and
unlike the market of the high end PC’s, Microsoft, Microsoft would face a lot of competition
from Linux based operating systems. Hence pricing and promotion strategies must be used to
retain market share of the larger end PC’s as well. If Microsoft is to use in order to drive for
revenue only the sales of Netbooks to recover

The biggest challenge Google will face is the brand image of Microsoft in operating system
market. Microsoft holds athe monopoly of 92.2%18 over the market hence benefits from the
economies of scale. Google have to spend heavily on its branding and advertisement
promotion while launching Chrome OS. The promotion techniques would include both
above and below the line forms of promotion such as advertisements on the web, paid
features and reviews in leading technology websites, magazines and all other important forms
of media. Google has advantage of very large numbers of its search engine users . Googleand
can use web search pages and their Google Ads19 program to promote Chrome OS.

Google also have to come up with an USP20 of Chrome OS during initial stages of the product
life cycle that convinces users to switch from OS that are already proven reliable. The best
possible product differentiator for Google is to give its chrome OS a brand image of a new
revolutionary OS that is light, fast and secure that helps the users connect to the
internet faster than any other OS in the market.

Google can create applications that allow its OS users to access their online applications
(services) right from their desktops. Computer users with preloaded Chrome OS would use
Google’s web basedthese applications for managing email, calendar, and editing documents
and spreadsheets at great ease thereby increasing its market share of its web applications.

18
Refer to “Microsoft launches Windows 7, eyes PC sales rebound”

19
Google’s Advertisement program where Google displays sponsored links on other web pages. These web
pages on which the advertisements are displayed receive a small amount of revenue from Google.

20
USP or Unique Selling Point is a particular aspect of a product that differentiates it froorm the competitors
products. The USP of the product is what makes the customers willing to invest their resources into the
product.

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Growth of Netbooks market in past two years has impacted the overall Operating Systems
development. Many light operating systems are being created like Windows released
Netbook compatible versions of Windows XP and Windows 7. Google developed existing
Chrome browser with a Linux kernel to come up with a new operating system.

The major strategic advantage to Google by targeting Netbooks would be easy penetration
into rapidly increasing sales volume of personal computer market. If Google establishes itself
as market leader in Netbook operating system, soon it would be able to acquire much larger
market share of entire operating system market.

Expected low price of Chrome OS would further lower the Netbook prices thereby increasing
the demand for Netbook and Google’s penetration of the market.

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Conclusion
The Chrome OS will be tailored to meet the requirements of Netbook users, having
technological features that allow optimal use of their Netbooks; this would also be the main
product differentiator. With its expected technically advanced features and focus target
audience of Netbook market it would be able to meet the challenges from Windows7 and
surpass its Netbook version. Windows and other high end OS will continue to dominate the
market of high-end laptop users.

By penetrating the rapidly growing, high volume Netbook market, Google has decided to
enter the right market at the right time. Over a period of time it will be able to establish a
strong foothold in the operating systems market of laptops. Another strategic gain for Google
with its own OS would be the increase of user base of Google “Apps”.

All OS developers will be under immense pressure to develop high speed light OS
considering the new emerging dimensions of personal computer configurations.

With its expected technically advanced features and focus target audience of Netbook market
it would be able to meet the challenges from Windows7 and surpass the Netbook version of
Windows 7. Windows and other high end OS will continue to dominate the market of high
end laptop users.

While Google must provide its OS for cheap, Google’s track record of innovation indicate
that they shall launch more innovative, better product than Microsoft. Hence may be able to
grab market share of Netbook users.

Microsoft and Google can coexist in the same market by targeting different market segments,
While Google would use its products to target users with basic computing requirements
Windows 7 can target corporate users who require high end computing power for their data.

Obliterate

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Bibliography
Barratt, , Micheal, and Andy Mottershead. Business Studies. Essex,

England: Pearson Education Limited, 2007. 69-70,186-189.

Print.

Stipmson, Peter. AS and A Level Business Studies. First South East

Asian Edition. Chennai, India: Cambridge University Press,

2006. 62-63, 171-173. Print.

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Appendix 1

Google's new operating system to take on Microsoft

8 Jul 2009, 1301 hrs IST, New York Times

http://economictimes.indiatimes.com/articleshow.cms?msid=4752639

NEW YORK: In a direct challenge to Microsoft, Google announced late on Tuesday that it is developing an
operating system for PCs based on its 
Chrome Web browser.

The move sharpens the already intense competition between Google and Microsoft, whose Windows operating
system controls the basic functions of the vast majority of personal computers. 

In a post on its company blog, Google said the operating system would initially be aimed at netbooks, the
compact, low-cost computers that have turned the PC world on its head. It said the open-source software,
called Chrome OS, would be available in the second half of next year. 

“Speed, simplicity and security are the key aspects of Google Chrome OS,” the blog post said. “We’re
designing the OS to be fast and lightweight, to start up and get you onto the Web in a few seconds.” 

Google has already developed an operating system for mobile phones, called Android. And several
manufacturers of netbooks are also using that software. 

Google has long promoted a vision of computing in which applications delivered over the Web play an
increasingly central role, replacing software that runs on the desktop. In that world, applications run directly
inside an Internet browser, rather than atop an operating system, the traditional software that controls most of
the operations of a PC. 

Also Read

Last year, the company released the Chrome browser, which it described as a tool for users to interact with
increasingly powerful Web programs, like Gmail and Google Docs, along with Web applications created by
other companies. Since then, Google has been adding capabilities to Chrome, like allowing it to run
applications even when a user is not connected to the Internet. 

It is not clear how much work it would take for Google to turn Chrome into the central part of a full-fledged
operating system. But in a recent interview, Marc Andreessen, who developed the first commercial browser
and co-founded Netscape, said Chrome was already well along that path. 

“Chrome is basically a modern operating system,” Andreessen said. 

Google has also long customized a version of the Linux operating system for use internally. 

The rise of netbooks has started to challenge some of Microsoft’s dominance in personal computing software.
The first wave of netbooks relied on various versions of the open-source Linux operating system, and major
PC makers like Hewlett-Packard and Dell have backed the Linux software. 

In an unusual move, Intel, the world’s largest chip maker, has worked on developing a Linux-based operating
system called Moblin as well. 

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The company has aimed the software at netbooks and smart phones in a bid to spur interest for its mobile
device chip sold under the Atom brand. 

To combat these efforts, Microsoft began offering its older Windows XP operating system for use on netbooks
at a low price. In addition, the company has vowed that the next generation of Windows, Windows 7, due out
this fall, will run well on the tiny laptops. 

Netbooks have stood out as the brightest part of the PC market during the global economic downturn. Overall,
PC sales have plummeted, while netbook sales have surged.

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Introducing the Google Chrome OS

7/07/2009 09:37:00 PM

http://googleblog.blogspot.com/2009/07/introducing-google-chrome-os.html

It's been an exciting nine months since we launched the Google Chrome browser. Already, over 30
million people use it regularly. We designed Google Chrome for people who live on the web —
searching for information, checking email, catching up on the news, shopping or just staying in touch
with friends. However, the operating systems that browsers run on were designed in an era where
there was no web. So today, we're announcing a new project that's a natural extension of Google
Chrome — the Google Chrome Operating System. It's our attempt to re-think what operating systems
should be.

Google Chrome OS is an open source, lightweight operating system that will initially be targeted at
Netbooks. Later this year we will open-source its code, and Netbooks running Google Chrome OS
will be available for consumers in the second half of 2010. Because we're already talking to partners
about the project, and we'll soon be working with the open source community, we wanted to share our
vision now so everyone understands what we are trying to achieve.

Speed, simplicity and security are the key aspects of Google Chrome OS. We're designing the OS to
be fast and lightweight, to start up and get you onto the web in a few seconds. The user interface is
minimal to stay out of your way, and most of the user experience takes place on the web. And as we
did for the Google Chrome browser, we are going back to the basics and completely redesigning the
underlying security architecture of the OS so that users don't have to deal with viruses, malware and
security updates. It should just work.

Google Chrome OS will run on both x86 as well as ARM chips and we are working with multiple
OEMs to bring a number of Netbooks to market next year. The software architecture is simple —
Google Chrome running within a new windowing system on top of a Linux kernel. For application
developers, the web is the platform. All web-based applications will automatically work and new
applications can be written using your favorite web technologies. And of course, these apps will run
not only on Google Chrome OS, but on any standards-based browser on Windows, Mac and Linux
thereby giving developers the largest user base of any platform.

Google Chrome OS is a new project, separate from Android. Android was designed from the
beginning to work across a variety of devices from phones to set-top boxes to Netbooks. Google
Chrome OS is being created for people who spend most of their time on the web, and is being
designed to power computers ranging from small Netbooks to full-size desktop systems. While there
are areas where Google Chrome OS and Android overlap, we believe choice will drive innovation for
the benefit of everyone, including Google.

We hear a lot from our users and their message is clear — computers need to get better. People want
to get to their email instantly, without wasting time waiting for their computers to boot and browsers
to start up. They want their computers to always run as fast as when they first bought them. They want
their data to be accessible to them wherever they are and not have to worry about losing their
computer or forgetting to back up files. Even more importantly, they don't want to spend hours
configuring their computers to work with every new piece of hardware, or have to worry about
constant software updates. And any time our users have a better computing experience, Google
benefits as well by having happier users who are more likely to spend time on the Internet.

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We have a lot of work to do, and we're definitely going to need a lot of help from the open source
community to accomplish this vision. We're excited for what's to come and we hope you are too.
Stays tuned for more updates in the fall and have a great summer.

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Something to Chrome about

Posted: Tue, Jul 21 2009. 8:19 PM IST

http://www.livemint.com/Articles/PrintArticle.aspx?artid=C1A4E124-7601-11DE-BC9A-
000B5DABF636

If computers are so smart, why can’t they simplify themselves? The Google Chrome
Operating System, due to be released next year, promises speed, simplicity and security

Niyam Bhushan
Using your computer just to check your email is quite a chore, and sometimes, rather dangerous. It may take
several minutes for your computer to whir, click and churn before it splashes an ominous-looking log-in screen.
Once you do enter your details correctly, it gives you a song and dance of sorts, but still no email. An
overwhelming clutter of icons, a busy-looking task bar and abrupt notifications that intimidate you about your
virus checker being out of date still fetch you no email. Meanwhile, your bloated operating system (OS) may
automatically start several megabytes of download for a software patch without your knowledge. You
eventually wade through menus and icons to read your mail.

Thugs, criminals and a whole bunch of creepy fellows

you wouldn’t ever invite into your home freely invade
your inbox through snippets of code. They subject you
to phishing attacks, attempt to infect your computer
with malicious software or flood you with emails that
embarrass and offend you.

Fetching emails on a computer is quite unlike filling a

room with light using a light bulb. Switch on the bulb
and the room is immediately illuminated. Switch it off
and it’s gone. It’s so simple, it can be done by children.

Too smart to be simple?

If computers are so smart, why can’t they simplify themselves? Especially if all you wish to do is browse
through your email, Facebook or Skype, buy tickets, job hunt, shop, download music, stream videos or explore
all the delightful new paradigms the Internet serves up so rapidly? More importantly, would you ever buy a car
that crashes like your computer?

Google feels the crux of all these problems lies with the OS. It’s that clever jumble of software that helps
Microsoft amass a huge fortune through monopolistic business practices, enables Apple to mesmerize people
and empowers Linux to bring digital freedom to consumers across the world.

Yet, the OS itself is decades old and has grown brittle with age. Shockingly, Internet support is an afterthought,
especially for Windows. Hence all your problems.

Imagine an OS designed from the ground up, boldly and intelligently embracing the Internet. Fortified against
viruses and other attacks, it is also shorn of everything else, thereby offering you nothing but a safe and efficient
Internet experience.

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Google took a seemingly innocuous step in this direction by launching a new browser called Chrome.
Surprising, because Google entered the highly competitive browser market almost 18 years late. Yet, according
to official sources, it has already captured 30 million users worldwide within its first nine months. People
apparently love the idea of a light and safer Web browser that renders all kinds of Web pages faithfully while
blacklisting potential harmful sites. Best of all, the Chrome browser is free, so go to www.google.com/chrome to
get started.

Caught like a deer in the headlights, Microsoft has responded with a brand new browser called Gazelle that tries
to ape Chrome’s new generation features.

Back to basics

The next step caught everyone unawares. The search giant suddenly announced the Google Chrome OS (GCOS)
on its official blog site: “Speed, simplicity and security are the key aspects of Google Chrome OS. We’re
designing the OS to be fast and lightweight to start up and get you on to the Web in a few seconds. The user
interface is minimal, to stay out of your way, and most of the user experience takes place on the Web. And as
we did for the Google Chrome browser, we are going back to the basics and completely redesigning the
underlying security architecture of the OS, so that users don’t have to deal with viruses, malware and security
updates.” Consumers may expect GCOS by mid-2010.

Google has partnered with various manufacturers to initially offer GCOS pre-installed on highly affordable
netbooks. This paves a smooth initiation to computing and the Internet for “the next billion” people. Google also
promises to keep GCOS free and open-source and have it run on any computer. GCOS is fundamentally based
on Linux, and does not limit itself to the Chrome browser. Feel free to use Firefox, Gazelle, Safari or anything
else. Evidently, Google stands to profit from anyone who hops on board the Internet.

Cloud configurations

The basic premise is the fruition of a much anticipated paradigm: Web-based applications. The Web has already
given birth to a new genre of “cloud computing” and social Web applications. Microsoft has announced that the
next version of Office will effectively run in your browser while being hosted off the Web. Ditto for Apple and
its iWorks. Google already offers Google Docs. Search for any category of software today and you will find
some level of Web integration.

Mercifully, Google is not the only one eyeing cloud computing while welcoming “the next billion” people.
Microsoft’s Windows7 OS and its Live.com services are strong contenders, as are Apple’s Snow Leopard
version of Mac OSX and its Mobileme.com services. Intel’s Moblin project also offers a fair degree of overlap.
Then there’s Ubuntu Netbook Remix (UNR) and Google’s own Android platform.

Confused? For the first time, consumers have something they’ve never really had with their OS—choice. And
that’s the most fundamental thing to wish for in the digital age.

GCOS Alternatives

If you’re a tech enthusiast and can’t wait till mid-2010 to try out GCOS, you have many alternatives to
immediately experience a refreshing approach to computing:

• UNR discards the traditional desktop metaphor for an intuitively simpler interface. Despite its name, UNR
works on any computer. Impressively enough, you can test it without actually installing it on your PC. Just
download UNR for free, follow the directions on the site on how to install it on a USB thumbdrive and then boot
a computer through the thumbdrive.

www.canonical.com/projects/ubuntu/unr

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• Moblin is an initiative spearheaded by Intel which is primarily aimed at a new range of mobile devices such as
nettops, netbooks and in-vehicle infotainment systems. You can download and play with it at

www.moblin.org

• Android is a mobile OS that can run on many handsets. It may eventually emerge a strong contender to
Apple’s iPhone, as Android is inherently open and free. Recently, Android has successfully been ported over to
a few netbooks.

www.code.google.com/android

CONNECT

Listen to music on TuneWiki

This free application is on top of BlackBerry’s App World. With TuneWiki, you can scroll the lyrics to a song
karaoke-style. It also lets you see what other users are listening to (‘Break the ice’ by Britney Spears is huge in
Azerbaijan). You can see what people nearby are listening to. On the Android version (the application is also
available for BlackBerrys and iPhones), you can see where in the world others are listening to the same song.
Songs can be bought on the site and forwarded to friends. From the iPhone, users can let friends on Twitter and
Facebook know what they are listening to.

©2009/THE NEW YORK TIMES

Flawless prints

Canon has announced a new printer which, it says, can resolve common photo printing flaws. The Pixma all-in-
one device employs Auto Photo Fix II technology to correct errors through exposure correction and
improvements in face detection and scene analysis, plus brightness and saturation correction. The new Pixma
inkjet printers also include software that enables users to print a specific area of a Web page. The $150 Pixma
MP560 Wireless2 Photo AIO Printer has built-in Wi-Fi connectivity. The printer, which employs five inks, can
deliver borderless 4x6-inch prints in about 39 seconds.

©2009/THE NEW YORK TIMES

Sony’s new camcorders

Sony has taken the wraps off two camcorders that can store up to 25 hours of high-definition (HD) video in their
built-in flash memory. The $1,100 HDR-CX500V and $1,300 HDR-CX520V handycam camcorders both
capture full 1,920x1,080 HD video: The CX500V is equipped with 32GB of built-in memory, while the
CX520V has 64GB. Its new Face Touch feature lets you prioritize faces by tapping a detected face on the 3-inch
touch-screen LCD. The camcorder will optimize focus, skin colour and brightness for the selected individual for
the entire recording session.

©2009/THE NEW YORK TIMES

Next must buy

The EyeClops Bionic Eye SE (Swivel Eye) is a TV microscope that is the best possible way to turn your big-
screen television into a Petri dish. Arriving in stores next month for $40, the SE is about the size of a baseball.
After you insert five AA batteries (not included), you connect the EyeClops to your TV’s composite video port
(the yellow plug) and toggle on the three LEDs on the device. There’s a single magnification level and the
threaded focus cap makes it easy to explore, say, the microprint on the back of a dollar bill or the finer hues of a
butterfly’s wing. This gadget might be sold in toy stores but don’t let that overshadow its potential as a scientific
exploration tool.

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©2009/THE NEW YORK TIMES

Write to us at businessoflife@livemint.com

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The Netbook Effect: How Cheap Little Laptops Hit the Big Time
By Clive Thompson02.23.09

http://www.wired.com/gadgets/wireless/magazine/17-03/mf_netbooks

Netbooks prove that we finally know what PCs are actually for. Which is to say, not all that
much. 
Illustration: Patrick Leger

Top 5 laptop makers:

1. Hewlett-Packard

2. Acer

3. Dell

4. Toshiba

5. Asustek

Top 5 netbook makers:

1. Asustek

2. Acer

3. Hewlett-Packard

4. OLPC

5. Dell

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Mary Lou Jepsen didn't set out to invent the netbook and turn the computer industry upside
down. She was just trying to create a supercheap laptop. In 2005, Jepsen, a pioneering LCD
screen designer, was tapped to lead the development of the machine that would become known
as One Laptop per Child. Nicholas Negroponte, the longtime MIT Media Lab visionary, launched
the project hoping to create an inexpensive computer for children in developing countries. It
would have Wi-Fi, a color screen, and a full keyboard—and sell for about $100. At that price,
third-world governments could buy millions and hand them out freely in rural villages. Plus, it
had to be small, incredibly rugged, and able to run on minimal power. "Half of the world's
children have no regular access to electricity," Jepsen points out.
The miserly constraints spurred her to be fiendishly resourceful. Instead of using a spinning hard
drive she chose flash memory—the type in your USB thumb drive—because it draws very little
juice and doesn't break when dropped. For software she picked Linux and other free, open source
packages instead of paying for Microsoft's wares. She used an AMD Geode processor, which isn't
very fast but requires less than a watt of power. And as the pièce de résistance, she devised an
ingenious LCD panel that detects whether onscreen images are static (like when you're reading a
document) and tells the main processor to shut down, saving precious electricity.
To build the laptop, dubbed the XO-1, One Laptop per Child hired the Taiwanese firm Quanta.
It's hardly a household name, but Quanta is the largest laptop manufacturer in the world. Odds are
that parts of the machine on your desk, whether it's from Apple, Dell, or Hewlett-Packard, were
made by Quanta—possibly even designed by Quanta. Like most Taiwanese computermakers, it
employs some of the sharpest engineers on the planet. They solved many of Jepsen's most
daunting engineering challenges, and by 2007, the OLPC was shaping up. The poor kids of the
world would have their notebook—if not quite for $100, for not a whole lot more.
Inspired (or perhaps a bit scared) by the OLPC project, Asustek—Quanta's archrival in Taiwan
and the world's seventh-largest notebook maker—began crafting its own inexpensive, low-
performance computer. It, too, would be built cheaply using Linux, flash memory, and a tiny 7-
inch screen. It had no DVD drive and wasn't potent enough to run programs like Photoshop.
Indeed, Asustek intended it mainly just for checking email and surfing the Web. Their customers,
they figured, would be children, seniors, and the emerging middle class in India or China who
can't afford a full $1,000 laptop.
What happened was something entirely different. When Asustek launched the Eee PC in fall
2007, it sold out the entire 350,000-unit inventory in a few months. Eee PCs weren't bought by
people in poor countries but by middle-class consumers in western Europe and the US, people
who wanted a second laptop to carry in a handbag for peeking at YouTube or Facebook wherever
they were. Soon the major PC brands—Dell, HP, Lenovo—were scrambling to catch up; by fall
2008, nearly every US computermaker had rushed a teensy $400 netbook to market.
All of which is, when you think about it, incredibly weird. Netbooks violate all the laws of the
computer hardware business. Traditionally, development trickles down from the high end to the
mass market. PC makers target early adopters with new, ultrapowerful features. Years later, those
innovations spread to lower-end models.
But Jepsen's design trickled up. In the process of creating a laptop to satisfy the needs of poor
people, she revealed something about traditional PC users. They didn't want more out of a laptop
—they wanted less.

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Spec Shot: Laptop vs. Netbook

Many netbooks trade the speedy onboard processors and roomy hard drives of a full-size laptop
for online apps and small—but fast—solid state drives. The result? A formidable machine at a
third of the price. 

Lenovo ThinkPad T500 Laptop Dell Inspiron Mini 9 Netbook

Intel Core 2 Duo P8400 2.26 GHz Processor Intel Atom N270 Single Core 1.6 GHz

Microsoft Windows Vista Home Operating System Ubuntu Linux 8.04

1 GB System Memory 512 MB

80-GB hard drive Storage 4-GB solid state drive

15.4 inches, 1280 x 800 pixels Screen Size 8.9 inches, 1024 x 600 pixels

802.11b/g Wireless Access 802.11b/g

$959 Price $299

By the end of 2008, Asustek had sold 5 million netbooks, and other brands together had sold 10
million. (Europe in particular has gone mad for netbooks; sales there are eight times higher than
in the US.) In a single year, netbooks had become 7 percent of the world's entire laptop market.
Next year it will be 12 percent.
"We started inventing technology for the bottom of the pyramid," Jepsen says, "but the top of the
pyramid wants it too." This bit of trickle-up innovation, this netbook, might well reshape the
computer industry—if it doesn't kill it first.
I wrote this story on a netbook, and if you had peeked over my shoulder, you would have seen
precisely two icons on my desktop: the Firefox browser and a trash can. Nothing else.
It turns out that about 95 percent of what I do on a computer can now be accomplished through a
browser. I use it for updating Twitter and Facebook and for blogging. Meebo.com lets me log
into several instant-messaging accounts simultaneously. Last.fm gives me tunes, and webmail

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does the email. I use Google Docs for word processing, and if I need to record video, I can do it
directly from webcam to YouTube. Come to think of it, because none of my documents reside on
the netbook, I'm not sure I even need the trash can.
Netbooks have ended the performance wars. It used to be that when you went to an electronics
store to buy a computer, you picked the most powerful one you could afford. Because, who
knew? Maybe someday you'd need to play a cutting-edge videogame or edit your masterpiece
indie flick. For 15 years, the PC industry obliged our what-if paranoia by pushing performance.
Intel and AMD tossed out blisteringly fast chips, hard drives went on a terabyte gallop, RAM
exploded, and high-end graphics cards let you play Blu-ray movies on your sprawling 17-inch
laptop screen. That dream machine could do almost anything.
But here's the catch: Most of the time, we do almost nothing. Our most common tasks—email,
Web surfing, watching streamed videos—require very little processing power. Only a few people,
like graphic designers and hardcore gamers, actually need heavy-duty hardware. For years now,
without anyone really noticing, the PC industry has functioned like a car company selling SUVs:
It pushed absurdly powerful machines because the profit margins were high, while customers
lapped up the fantasy that they could go off-roading, even though they never did. So coders took
advantage of that surplus power to write ever-bulkier applications and operating systems.
What netbook makers have done, in effect, is turn back the clock: Their machines perform the
way laptops did four years ago. And it turns out that four years ago (more or less) is plenty.
"Regular computers are so fast, you really can't tell the difference between 1.6 giga and 2 giga,"
says Andy Tung, vice president of US sales for MSI, the Taiwanese maker of the Wind netbook.
"We can tell the difference between one second and two seconds, but not between 0.0001 and
0.0002 second." For most of today's computing tasks, the biggest performance drags aren't inside
the machine. They're outside. Is your Wi-Fi signal strong? Is Twitter down again?
Netbooks are evidence that we now know what personal computers are for.Which is to say, a
pretty small list of things that are conducted almost entirely online. This was Asustek's epiphany.
It got laptop prices under $300 by crafting a device that makes absolutely no sense when it's not
online. Consider: The Eee's original flash drive was only 4 gigs. That's so small you need to host
all your pictures, videos, and files online—and install minimal native software—because there's
simply no room inside your machine.
Netbooks prove that the "cloud" is no longer just hype. It is now reasonable to design computers
that outsource the difficult work somewhere else. The cloud tail is wagging the hardware dog.
Most consumers have never heard of Taiwan's quiet, unheralded PC firms, but they've been
behind some of the most important hardware of the past three decades. Quanta first gained notice
in the '80s for cleverly cramming new components into notebooks. Then, in 2001,
Apple contracted with the company to design its G4 notebook from top to bottom. The product
was a spectacular success, and Quanta was soon doing engineering for every other major PC
maker. Asustek and MSI, the two other giants of the Taiwanese laptop world, also branched out
from motherboards into everything from LCD TVs to mobile phones. These companies are
enormous: Quanta had sales of $25 billion last year, more than marquee firms like Amazon.com,
Texas Instruments, and Electronic Arts.
Even though the Taiwanese manufacturers remained subservient to the well-known PC brands,
they soaked up tons of knowledge over the years. For instance, when Intel created its x486 chip
in 1988, Asustek built a compatible motherboard before Intel could make its own board work.
Later, Asustek was producing components for Apple laptops. "Nine times out of 10," recalls John
Jacobs, a former Apple manager who now covers the LCD market as an analyst for
DisplaySearch, "when we said 'Jump,' they said 'How high?' That's how Asustek learned a lot."
But for all their success, companies like Asustek and MSI were outsiders. And when Asustek
released the Eee netbook, big firms like Dell, HP, and Apple did nothing for months. "All the

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other brands were thinking, 'Oh, this is crap,'" recalls Lillian Lin, Asustek's global marketing
director.
Dell and HP weren't going to pioneer a $400 laptop, because they were already selling laptops for
$1,000. Why mess with a good thing? MSI had no laptop business at all, and Asustek had only a
small business selling full-price machines under its own brand, mostly in Asia and Europe. Since
the Taiwanese weren't addicted to selling SUV-class computers, they could swoop in like Honda
with smaller, more efficient models. They also knew how to design on the cheap after years of
producing motherboards with excruciatingly tiny margins.
In The Innovator's Dilemma, Clayton Christensen famously argued that true breakthroughs
almost always come from upstarts, since profitable firms rarely want to upend their business
models. "Netbooks are a classic Christensenian disruptive innovation for the PC industry,"
says Willy Shih, a Harvard Business School professor who has studied both Quanta's work on the
One Laptop per Child project and Asustek's development of the netbook.
The Taiwanese firms, Shih argues, now have enormous clout in the PC industry. In the US, we
regard branding and marketing—convincing people what to buy—as core business functions.
What Asustek proved is that the companies with real leverage are the ones that
actually make desirable products. The Taiwanese laptop builders possess the atom-hacking smarts
that once defined America but which have atrophied here along with our industrial base. As far as
laptop manufacturing goes, Taiwan essentially now owns the market; the devices aren't produced
in significant volumes anywhere else.
If you had asked Taiwanese hardware CEOs a few years ago about their relationship with Dell,
HP, and Apple, they'd have told you that the American companies did the branding and sales
while outsourcing their design and production to Taiwan. Today the view from Asia is
increasingly the reverse. "When I talk to them now," Shih laughs, "they say, 'We outsource our
branding and sales to them.'"
"But what about Photoshop?" It's the standard retort from those who dismiss netbooks as
children's toys. Sure, a dinky 1.6-GHz chip and Linux are fine for email and silly things like
YouTube. But what about when you need to do some realcomputing, like sophisticated photo
editing? The cloud won't help you there, kid.
In the narrowest sense, this is true: A really powerful application like Adobe Photoshop demands
a much faster processor. But consider my experience: This spring, after my regular Windows XP
laptop began crashing twice a day, I reformatted the hard drive. As I went about reinstalling my
software, I couldn't find my Photoshop disc. I forgot about it—until a week later, when I was
blogging and needed to tweak a photo. Frustrated, I went online and discovered FotoFlexer, one
of several free Web-based editing tools. I uploaded my picture, and in about one minute I'd
cropped it, deepened the color saturation, and sharpened it.
I haven't used Photoshop since.
Keep in mind that I like Photoshop. I'm not doing this to make any geeky ideological point about
how bleeding-edge I am or how much I hate paying for boxed software. It's simply that the hassle
of finding my Photoshop disc now exceeds the ease of using FotoFlexer. The code for working
with the browser-based app is a mere 900 KB, and "to the average user, that comes down really
fast," as Sharam Shirazi, CEO of Arbor Labs, which created it, points out to me.
My Photoshop experience is just one example of how the software industry is changing. It used to
be that coders were forced to produce bloatware with endless features because they had to guess
what customers might want to do. But if you design a piece of software that lives in the cloud,
you know what your customers are doing—you can watch them in real time. Shirazi's firm
discovered that FotoFlexer users rarely do fancy editing; the most frequently used features are
tools for drawing text and scribbles on pictures. Or consider the Writely app, which eventually
became the word processor part of Google Docs: When Sam Schillace first put it online, he found
to his surprise that what users wanted most was a way to let several people edit a document
together.

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"It used to be, 'I'm buying a paint program, and I'll get the one with 5,000 features. I don't know
what 2,000 of those features are, but I'll get it just in case,'" Schillace says. "Today it's just,
'Which one is most easily available? Which one is ready online?' So applications are competing
on merit; they're not competing on bulk."
Netbooks are so cheap, they're reshaping the fundamental economics of the PC business. Last
October, British mobile-phone carrier Vodafone offered its customers a new deal: If they signed a
two-year contract for high-speed wireless data, Vodafone would give them a Dell Mini 9
netbook. That isn't quite the same as getting a free computer; after all, Vodafone bills users
$1,800 on that two-year contract, so it can afford to throw in the netbook. (In December,
RadioShack offered a similar deal: a $99 Acer Aspire netbook for anyone who signed up for two
years of AT&T's 3G service.)
What these deals signal is that computers are developing the same economics as mobile phones.
Hardware is becoming a commodity. It's difficult to charge for. What's really valuable—what
people will pay through the nose for—is the ability to communicate.
So netbooks have sent a sort of hot-cold shudder through the computer industry. Sure, it's great to
have an exploding new product category. But this is a category in which it's incredibly hard to
make a dime: At $300, a netbook sells for barely more than the sum of its parts—and sometimes
less. "The profit margins on these things are nonexistent," chuckles Paul Goldenberg, managing
director of Digital Gadgets, which created a line of netbooks under the Sylvania brand. "Everyone
is saying 'We're losing money now, but we'll make it up on volume, right?'"
Nearly every company in the PC industry has had its game plan uprooted by netbooks. Microsoft
had intended to stop selling Windows XP this summer, driving customers to its more lucrative
Vista operating system. But when Linux roared out of the gate on netbooks, Microsoft quickly
backpedaled, extending XP for another two years—specifically for netbooks. Most experts guess
that Redmond can charge barely $15 for XP on a netbook, less than a quarter of what it
previously sold for. (Microsoft corporate vice president Brad Brooks assures me the company is
earning "good money" on the devices and plans to make sure its next OS, Windows 7, can run on
netbooks—Vista performs poorly on them.) For its part, Intel is selling millions of its low-power
Atom chips to netbook manufacturers. "We see this as our next billion-dollar market," says Anil
Nanduri, Intel's technical marketing manager—except that the company makes only a fraction of
the money on an Atom chip as on a more powerful Celeron or Pentium in a full-size laptop.
The great terror in the PC industry is that it's created a $300 device so good, most people will
simply no longer feel a need to shell out $1,000 for a portable computer. They pray that netbooks
remain a "secondary buy"—the little mobile thingy you get after you already own a normal-size
laptop. But it's also possible that the next time you're replacing an aging laptop, you'll walk into
the store and wonder, "Why exactly am I paying so much for a machine that I use for nothing but
email and the Web?" And Microsoft and Intel and Dell and HP and Lenovo will die a little bit
inside that day.
The decision is probably out of American hands. Indeed, living in the US—where netbooks are
only just taking off—it can be hard to grasp just how popular the devices have become in Europe
and Asia and the degree to which they're already altering the landscape. As Shih told me, "I was
talking to the chair of one of the major Taiwanese notebook manufacturers, and he said, 'This is
where my next billion customers comes from.' And he was not referring to the US." He meant the
BRIC countries—Brazil, Russia, India, China—where billions of very price-conscious customers
have yet to buy their first computer. And the decisions they make—Windows or Linux?
Microsoft wares or free cloud apps?—will have enormous influence on how computing evolves
in the next few years.
Netbooks could drive production of even crazily cheaper, lighter-weight computers. "If
everything you're doing is online, then the netbook becomes a screen with a radio chip. So why

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do you need a motherboard?" OLPC designer Mary Lou Jepsen says. "Especially if you want the
batteries to last. Why not just make it a screen and a really cheap $2 to $5 radio chip?" The cloud
is also probably going to get powerful in ways that now seem like fantasy. AMD is working on
an experimental 3-D graphics server farm that would run high-end videogames, squirting a
stream out to portable devices so you could play even the most outrageously lush games without
a fancy onboard processor. Patrick Moorehead, AMD's vice president of marketing, recalls that in
2007 gamers had to buy special powerful desktop machines loaded with RAM and $600 graphics
cards to play Crysis: "Now imagine you've got servers running Crysis and streaming it to an
iPhone or a netbook, sending just the vectors that let you navigate the game."
Because this is the future of hardware. For a few users who need a high-performance device, PC
makers will offer ever-more-blisteringly fast, water-cooled boxes with screens the size of your
living room—at $2,000 a pop. For everyone else—lawyers looking for something to do on the
train, women desperate for something that fits in their handbag—netbooks will dominate. It's the
rise of the very small machines.
Contributing editor Clive Thompson (clive@clivethompson.net) wrote about open source
hardware in issue 16.11.

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Microsoft launches Windows 7, eyes PC sales rebound

http://www.reuters.com/article/idUSTRE59L0SV20091022

Thu, Oct 22 2009

By Bill Rigby
NEW YORK (Reuters) - Microsoft Corp launched Windows 7 on Thursday, its most important release in more than a
decade, aiming to win back customers disappointed by Vista and strengthen its grip on the PC market.
The world's largest software company, which powers more than 90 percent of personal computers, has received good
reviews for the new operating system, which it hopes will grab back the impetus in new technology from rivals Apple Inc
and Google Inc.
"They met expectations but that was pretty much it," said Michael Gartenberg, a long-time Microsoft analyst at market
research firm Interpret after a launch event in New York. "They showed off some very cool things, but now they have to
keep the momentum going."
The new system -- which is faster, less cluttered and has new touch-screen features -- comes almost three years after the
launch of Vista, whose complexity frustrated many home users and turned off business customers.
The success of Windows -- which accounts for more than half of Microsoft's profit -- is crucial for Chief Executive Steve
Ballmer to revive the company's image as the world's most important software company.
"Windows 7 is a chance for us to let the PC be not only more interesting but just simpler and faster for the many, many
hundreds of millions of people who use them," Ballmer told Reuters Television in an interview on Thursday.
NEW HARDWARE
Ballmer and other executives demonstrated at the event a range of new devices showing off Windows 7, from ultra-slim
laptops to large touch-screen computers, highlighting a new Kindle book-reading application from Amazon.com Inc and
live-streaming CBS television shows.
Crowds lined up overnight to see the new software and check out the latest PCs at the first branded Microsoft store, which
opened on Thursday in Scottsdale, Arizona.
Microsoft is charging $199.99 for the Home Premium version of Windows 7, or $119.99 for users seeking to upgrade from
older versions of the operating system -- well below comparable prices for Vista.
It also has a range of offers in conjunction with retailer Best Buy Co Inc and PC makers such as Dell Inc and Acer Inc.
The U.S. holiday season will soon reveal whether consumer PC sales get a kick from Windows 7, but success with
corporations -- the key to Microsoft's financial power -- will not be clear until next year, analysts say.
Windows 7 sales will not immediately impact the bottom line of Microsoft, which is expected to post a lower quarterly profit
on Friday.
The company's shares closed up 1 cent at $26.59 on Nasdaq. They are up 79 percent since early March. (For a graphic
showing major Windows releases and Microsoft's share price, click here)
SHARES UP
Global PC sales rose 2.3 percent in the third quarter compared with a year ago, according to research firm IDC, after two
quarters of declines.
Market-watchers are betting on further recovery of computer sales next year, as the economy improves and businesses
replace old machines, but opinion is divided on how strong the impact of Windows 7 will be.

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"It's the chance to encourage corporations to update their computers, to get families to upgrade or put in a second or third
computer," Ballmer told Reuters TV. "I am optimistic, but we have the economy."
That won't necessarily happen, said Brendan Barnicle at Pacific Crest Securities.
"What's going to be really interesting is whether this spurs a hardware replacement cycle or it's just a Windows replacement
cycle," said Barnicle, who estimates that more than 820 million PCs across the world run Windows.
(Reporting by Bill Rigby; Additional reporting by Jim Finkle, Wojtek Dabrowski, Bobbi Rebell and Gabriel Madway;
Editing by Tiffany Wu, Richard Chang and Carol Bishopric)
© Thomson Reuters 2010. All rights reserved. Users may download and print extracts of content from this website for their
own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by
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and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant
interests.

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Appendix 2
Company Background
Google Inc is one of the world’s most innovative and fastest emerging IT 21 company with a
strong presence on the internet. It is a market leader in the internet search engine
technologyhaving the largest market share of 55.2%22. Google has expanded its product
portfolio with applications known as “Google Apps”, which in line with its aim 23, meant to
“help users gather information together”. These applications include “Picasa”, which allow
its users to manage and share photos, “Orkut” a social networking website, “Google Docs” an
application allowing users to edit documents and spreadsheets online and “Gmail” a highly
successful email mail client. Google “Chrome”, their web browser has gathered about 30
million users in about nine months24.

21
http://money.cnn.com/magazines/fortune/fortunefastestgrowing/2009/snapshots/1.html

22
http://www.onestat.com/html/aboutus_pressbox21.html (as on 13:33hrs 31/01/2010)

23
“To organize the world's information and make it universally accessible and useful.”
http://www.google.com/corporate/

24
Refer to appendix

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