Google aims twin daggers at Microsoft’s heart

The
search giant’s war with Microsoft is The Big One, the confrontation that will
determine what kind of future Microsoft has, and maybe if it even has a future.
And the two new weapons Google unsheathed last week carry an unmistakable
message of mortal peril.

First
came the Nexus S, the new Google-labelled smartphone and the first to run
‘Gingerbread,’ Google’s latest Android operating system. Then came a plain
black laptop called the Cr-48, the first computer to run the company’s web-based
Chrome Operating System.

On
the surface, neither seems particularly menacing. The Nexus S, made by Samsung,
is the successor to one of the most hyped and least successful products of
2010, the lovely and ill-fated Nexus One. And the Cr-48 isn’t even for sale.
It’s a generic prototype that Google is making available to thousands of
developers, companies and others to get them familiar with the concept of the
new operating system before commercial versions from manufacturers such as
Samsung Electronics and Acer show up next year.

Still,
the two devices represent an enormous threat to Microsoft and its chief
executive officer, Steve Ballmer. The success of Android is rapidly foreclosing
Microsoft’s growth prospects as more computing is done on mobile devices.
Meanwhile, Chrome OS takes dead aim at its great twin cash cows: the Windows
and Microsoft Office franchises.

Of
the two new offerings, the Nexus S is the one most visible to consumers. The
phone went on sale in the US yesterday online for $199 on a two- year contract
from Deutsche Telekom’s T-Mobile USA, and for $529 with no contract.

The
phone, a variation on Samsung’s popular Galaxy S line, comes with a gorgeous
four-inch touch screen, front- and rear-facing cameras for video chatting and a
passel of Google apps and services. Its potential killer application is Near
Field Communication, a technology that allows it to read encoded information
from special chips that can be embedded in signs, on T-shirts or other objects.

Putting
NFC support into Android is the biggest step yet toward using the mobile phone
as a way of paying for things. And it comes at a time when Microsoft is still
playing catch-up. Having frittered away its early strength in smartphones, it
suffered a series of stumbles, including a line of youth- oriented phones
called Kin that it introduced this year and pulled from the market after less
than two months. Its latest effort, the Windows Phone 7 operating system, is a
great improvement – but still lacks such basics as cut-and-paste functionality.

It’s
possible for Google and Apple to both succeed in mobile phones. It’s harder to
imagine Google and Microsoft both thriving. Google’s business model, which
calls for getting manufacturers to use its operating system, is far closer to
Microsoft’s than to Apple’s strategy of making money on the sale of proprietary
hardware. And, of course, Google offers Android to manufacturers at a price
that Microsoft can’t beat: free.

While
Android is all about limiting Microsoft’s future, Chrome OS takes dead aim at
its present: the Windows and Office businesses that, in the quarter that ended
September 30, earned $6.7bn of the company’s $7.1bn in operating income.

At
first glance the Cr-48 – Cr being the symbol for the element chromium – looks
like a basic laptop. The differences become evident once you turn it on. With
no large programs or device drivers to load, it boots in 15 seconds. The
operating system is, essentially, just a Web browser that you can never close.
Forget about a hard drive: Everything you use, all your programmes and all your
data, reside in the cloud, on Google’s distant servers. And it uses not a bit
of Microsoft software.

Nor
is Microsoft the only one threatened. What kind of chip powers the Cr-48? Who
cares? For the record, the Cr-48 has an Atom microprocessor from Intel, but
it’s no more relevant than what kind of chip powers your smartphone. How about
makers of flash memory chips, like Toshiba? A Chrome OS machine needs little – the
Cr-48 has only 16 gigabytes – since nothing is stored on the computer itself.

Chrome
completely commoditizes the hardware; the only things that count are being
connected to the Internet, and at what speed. For now, that’s Chrome’s biggest
weakness. While the Cr-48 works either over a Wi-Fi network or its built-in
Verizon Wireless 3G service, you can’t always count on getting a connection. On
a cross-country flight this week, the Cr-48 was a useless, inert brick.

On
the other hand, that isn’t likely to be a permanent condition as internet
connections become ever more ubiquitous. Some airlines have already started
rolling out onboard Wi-Fi.

Since
Chrome OS, like Android, is free, it’s logical to ask what Google gets out of
it. Company executives talk about the benefits of tying users to Google
services and gaining valuable data to help refine its search algorithms. It
remains to be seen whether those users will be troubled by the privacy
implications and whether Google’s business model will work for manufacturers.

You
can’t help thinking that the real point of Chrome is the threat it poses to
Windows. From its founding, Google has defined itself as the anti-Microsoft. Its
“don’t be evil” corporate mantra never needed to specify what it meant by
“evil,” because everyone already knew. The fact is, Google doesn’t actually
need Chrome OS to succeed. Microsoft, though, desperately needs it to fail.

(Rich
Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.)