Wednesday, February 23, 2011

Apple Is Eating HP's Laptop Lunch

Hewlett-Packard Tuesday night reported a 12% decline in the "consumer" portion of its personal systems group. That's mostly laptops. With this news fresh in mind, I decided to visit 15 of the cafes located closest to the HP headquarters, mostly within a 2-mile radius, to see what the people closest to HP were using in terms of laptops.The survey took me about 90 minutes to conduct, and is, of course, of limited statistical significance. But still, out of the 100 laptops and tablets observed in 15 of the cafes closest to the HP headquarters:

Apple MacBook: 45
Lenovo: 14
Dell: 14
Apple iPad: 9
Sony 6
HP 4
Toshiba 3
Acer 2
Asus 2
Samsung 1

Aside from its statistical limitations, one can, of course, criticize this kind of quick survey from other angles, such as enterprise-vs.-consumer, HP employees or owners don't visit cafes, or don't visit cafes located down the street from HP, or whatever. That said, based on the kind of publicly reported market shares, in which Apple normally scores not too far from 10% and is in a similar category to HP, this kind of quick survey looks like a nasty leading indicator for HP in the laptop sales department.

Why is Apple outselling HP, as well as everyone else, in the laptop category? It's not because of price, because most people can tell that Apple laptops generally start as high as two times that of HP and other laptops. No, people are willing to pay more for Apple laptops as a result of the superior shopping experience in the Apple store, the superior service at the Genius Bar, the easier-to-use services such as iTunes and TimeMachine. Of course, most people know that Apple's actual hardware product design leads the pack by a significant margin.

I decided to visit the largest electronics store located closest to HP's headquarters, within walking distance, called Fry's. It offered numerous HP and other laptops with terrible merchandising, including no Internet connectivity, no batteries, and often missing or incorrect price tags or spec sheets. Product names were incomprehensible and bewildering, such as "XYZ-1200s PQ/55-T" or something similar. Looking at the salespeople and the service desk, I felt like I was about to negotiate the price of a hand-knotted rug on a Sunday bazaar in Damascus. If I were in the market for a laptop today, there is no doubt the deal would happen at the Apple store, and not here.

With Apple clobbering the competition -- HP in particular -- in the laptop department, what's next on the horizon? Let me suggest that laptops built on the Google Chrome OS are likely to take the market by storm, starting this summer and accelerating into 2012. The first Google Chrome OS laptop, which I have had since early December, is superior to its competition in many respects, especially considering that it would probably sell for $299 (my guess). It boots four times as fast as my MacBook Pro and has zero software complications of any kind. In other words, it's basically a maintenance-free laptop, which will likely be sold for the same price ($300) as a comprehensive three-year warranty for a Windows or Mac laptop. With Google Chrome OS, parents and corporate IT administrators would need less time to help children, employees and the elderly fix their PCs.

Apple is eating HP's laptop lunch right now, but with the Google Chrome OS laptops -- built by Acer, Samsung and potentially others -- hitting the market this summer at superior prices and lower cost of ownership, everyone including Apple has reason to worry a lot. Google Chrome OS may just end up the technology story of the year, and nobody is talking about it yet.