January 20, 2009, 11:27 AM — Possibly Microsoft's most important strategic goal for Windows 7, in addition to redeeming the brand damage done by Windows Vista, is to dominate netbooks, now the fastest selling segment of the PC market.
This may not bode well for the Linux operating system. With netbooks, the open-source OS with a highly tech-savvy audience found a market where it could legitimately threaten Windows. But Linux will face an uphill battle in this category now that the sleeping software giant has been awoken to the opportunity that netbooks present, say industry analysts.
Top netbook vendors Asus and Acer, which together account for the majority of the netbook market, run Linux on roughly 30 percent of their Eee PC and AspireOne netbooks respectively-a figure that dwarfs Linux's nearly 1 percent share of the higher-end PC market. Hewlett-Packard, Dell and Lenovo released netbook products in the fourth quarter of 2008, all in the US$400 price range and offering a choice of either Windows XP or some flavor of Linux.
But Microsoft designed Windows 7, unlike notorious resource hog Vista, with netbooks in mind (Click here for a video demo of the Windows 7 pre-beta running on a netbook). According to Microsoft's Windows Consumer Product Managing Director Parri Munsell, "Windows 7 has been optimized and engineered to run on anything, from the smallest notebook to the most loaded laptop or desktop."
Netbooks Crept Up on Microsoft
Why is making Windows 7 small form-factor friendly a necessity for Microsoft? The company was caught off guard by a sudden netbook spike in popularity in 2008 that bit into its bottom line.
In its last quarterly earnings report in October, Microsoft pointed directly at explosive netbook sales in 2008 as one of the main reasons for sluggish year-over-year growth for Windows Vista. Because Vista's hardware requirements and licensing costs are too much for netbook OEMs, Microsoft had to get Windows XP running on netbooks to curb the Linux momentum, analysts say.
Initially, netbooks only ran Linux and the OS was able make significant headway before and after Microsoft put XP on them. Asus and Acer executives have been quoted recently as saying that Linux should sustain a netbook market share of 20 to 30 percent.
Linux Lacks Marketing Muscle
But despite reports from bloggers that Linux on netbooks could undercut Windows, industry analysts remain doubtful that Linux can keep up the netbook momentum now that these lightweight, inexpensive laptops have become more mainstream-particularly when the competition is Microsoft, a marketing giant.
"I don't think Microsoft is really worried about Linux on the client side," says Roger Kay, president of research and consulting firm, Endpoint Technologies. "Most attempts to get Linux moving on the client side have gone nowhere and I think its share of the netbook market will decline when Windows 7 arrives."
A bigger problem than Linux, says Kay, is that Microsoft is running "a trailing edge technology [Windows XP] on netbooks" and that Vista is too resource-heavy for that market.
"If Vista could be trimmed to run on netbooks, Microsoft would do it. But for now it must use old material with XP," Kay says.
Analyst Rob Enderle, president of technology research from The Enderle Group, agrees that Microsoft doesn't see Linux as much of a threat and that refocusing on the netbook market is more about "Microsoft addressing the problem of having to keep shipping Windows XP long after its expiration date."
Enderle says that getting XP on netbooks was clearly a response to Linux gaining traction, but that Microsoft is not afraid of consumers or OEMs having a preference for Linux.
"The problem was that Linux could run on a netbook and Vista couldn't, not any consumer or OEM love for Linux," he adds.
Will Google Bring Linux to Netbooks?
The netbook market is forecasted to stay red-hot. In December, research firm IDC raised its projection for global shipments of netbooks to 11.4 million units for 2008 and 21.5 million in 2009. Market research company DisplaySearch predicts that netbooks will own roughly 16 percent of the notebook PC market by 2011.
Microsoft is likely to promote Windows 7 on netbooks right away with full force. Kay says he expects Microsoft "to roll out a netbook-specific version of Windows 7 to keep the price point right and keep things proportional."
The only way for Linux stay in the game, says Enderle, is if a vendor with capital pushes a Linux-based OS on netbooks. Enderle mentioned that Google may just be the company for the job.
"No one has yet created something like the MacOS using Linux for a netbook, but the rumor is Google will do so shortly with Android," he says.