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Author: DCWD40 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2545  
Subject: Re: Rising Star Buy: Google Date: 5/18/2011 1:34 PM
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I was doing research on Chrome, the new Google operating system (OS) for tablet computers, and thought that the GOOG purchase by Alyce might get a big boost from this product over the coming years.

Chrome has been available for a while but Samsung and Acer are going to be the first to bring products to market in June. The first reviews are not kind. They basically say you can get a better tablet, with better features, with a Microsoft operating systems. Try this link for some really harsh words.

http://www.betanews.com/article/Ill-take-Windows-and-a-good-...

Why Chrome will be different than Android (the GOOG operating system for phones) is that when Android entered the marketplace people said, "Why would a cell phone company buy an operating system when they have developed their own in house?" Android was an increased cost if you ignored the fact it cost money to develop an operating system in house. Android was said to be nothing more than what Nokia and the like already had. Now Android is in 50% of the phones sold but it is not a major profit generator because it is sold with a small margin.

Chrome is going to compete with Windows. If GOOG uses the Andriod model, it will undercut Windows pricing to gain market share. This time though, the margins will not be insignificant. As Chrome grows, its profit impact will be easy to see.

So, if Chrome is a disappointment out of the blocks, why am I writing about it? Well, what the reviewers are not discussing are four features that are in the current product that are customer winners. Let me quote from GOOG's Web site (with my bolding) as I make comments:

1) "Chromebooks boot in 8 seconds and resume instantly. Your favorite websites load quickly and run smoothly, with full support for the latest web standards and Adobe® Flash®. In fact, Chromebooks are designed to get faster over time as updates are released."

Microsoft has designed their OS so that it can take an eternity to come back to life after being powered off. This Chrome feature alone will get word of mouth going and create a second (after Apple) hip product that makes Windows seem downright dated.

2) "Your apps, documents, and settings are stored safely in the cloud. So even if you lose your computer, you can just log in to another Chromebook and get right back to work."

Who is going to advertise on Glenn Beck and Rush Limbaugh? The need for Carbonite (which advertises extensively on radio) to backup and protect your data will be the old way of doing things. Your data will be GOOG's responsibiliy. [The company that makes Carbonite might be a good short in a year or so.]

3) "Chromebooks run the first consumer operating system designed from the ground up to defend against the ongoing threat of malware and viruses."

The cloud, because of Amazon and Sony's Playstation, now is a security and availability nightmare in most consumers minds. Yet, before this, Chrome was trying to address one of Windows big weaknesses -- hacker attacks and other problems. While it cannot be 100% hacker proof, for now, it can offer an Apple level of security. It is designed to protect against bad things happening to your data. [And, NVEC (yesterday's stock suggestion) might have the anti-tamper product that will button-up the cloud's security problems.]

4) "Your Chromebook gets better and better over time, unlike a traditional PC. When you turn it on, it updates itself. Automatically. All of your apps stay up-to-date, and you get the latest and greatest version of the operating system without having to think about it. Annoying update prompts not included."

Chrome takes the Apple Store to whole new level. There is a video at the Chrome link (below) that explains how you can borrow and test new software before buying. Remember, getting access to software is in your cloud profile. Vendors don't have the risk of their software being copied so why not let you test? You cannot use the data created with the software once you no longer have access to it.

And the process of always updating the software is simple for Chrome. It is in the cloud. There is not a copy of each piece of software for every user profile. There is a today's single copy for everyone. So, with every sign-on, you get fresh software.

http://www.google.com/chromebook/features.html

So how do software companies make money over time if their software is updated every time you access the system? Simple. There will always be new versions. Drafting Version 1 will get a new version named Drafting Version 2. If you own Version 1, you will get that version. Want Version 2? Ah, that will cost you.

Microsoft's success has not been based on Day 1 hits. Xbox took years to get to the top. Word, had to fight its way through Multimate and that took years. Before Excel, the market was dominated for years by Lotus 1-2-3. Lotus is owned by IBM today but Excel is still the market champ.

Where I see GOOG winning in a highly profitable way with Chrome is through the inch-by-inch process of improvements. The four features above are significantly better than Microsoft's offering. With Mr. Softie's three year or more Window's update cycle, is not in a position to quickly respond. Chrome OS could have a new feature added any day, and every day.

There is another stinker in the GOOG Store too. Microsoft's sweet spot of profitability is called Microsoft Office. GOOG has a word processor, spreadsheet, and presentation tool that was developed in house. It's been available for years but do you know anyone using it? Probably not. It's cheap (an unsupported version is available for free) but the world easily links to Office products. Where the rubber meets the road here is Android and Chrome. Will they work together? Yes. If GOOG can make Chrome the OS of choice for 50% of the tablets, the door flies open for people to go the "integrated solution" of choice -- and it will be GOOG products in the GOOG Store working with the GOOG dominate OS's.

I am not easily impressed and it has been a long time since I have seen an established vendor with a product that looks like it is in the right spot today for future growth. The last one like that for me was IMAX. I got the story. Loved owning the stock. Made a very nice profit.

Alyce, your GOOG pick may be performing poorly at the moment. The big question in the press is if Larry Page should be CEO. I think he should because I think GOOG is ready to lead a technology explosion on multiple fronts (search, cell phone OS, tablet OS, app store, YouTube, Books, advertising). When you add in their health, social, and other efforts GOOG could be a massive company with formidable software that squeezes the likes of Microsoft to a formerly-known-as role.

I still do not own GOOG but I now know why I do want to own it in the future.

W.D.
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