HP Considering Android
As Posted at InformationWeek

The computer maker reportedly may be considering swapping out Microsoft Windows for the Android operating system in some PCs.

Hewlett-Packard (NYSE: HPQ) on Tuesday said it's studying Google (NSDQ: GOOG)'s Android operating system to determine whether it would be useful in PCs and other products, but didn't commit to using the software in any particular device.

HP's comments to InformationWeek came in response to a Wall Street Journal report that said the computer maker is considering swapping Microsoft (NSDQ: MSFT) Windows for Android in some HP mini-laptops, which the industry calls netbooks.

While acknowledging it's studying the OS, a company spokeswoman said HP hadn't committed to using the software in any computer.

"HP is acknowledging that we are studying the Android operating system," the spokeswoman said. "We want to assess the capability that Android may have for the computer and communications industry.

"As to how and when HP might produce any products using the Android OS, we don't comment on any speculation like that."

As the world's largest PC maker, HP's use of Android would be a major boost for the Google-developed OS that's used today in mobile phones. Because Android is open source, any company can download the software at no charge and use it without permission from Google.

Google confirmed that fact Tuesday in calling Android a "free, open source mobile platform" in an e-mail sent following a request for comment by InformationWeek.

"This means that anyone can take the Android platform and add code or download it to create a mobile device without restrictions," a Google spokeswoman said. "The Android smartphone platform was designed from the beginning to scale downward to feature phones and upward to MID [mobile Internet devices] and netbook-style devices."

The use of Android in a netbook isn't new. Asustek Computer said last month that it had dedicated engineers to create an Android mini-notebook, but had not decided whether it would sell it. The system could be completed by the end of the year.

In January, Matthaus Krzykowski and Daniel Hartmann, who run startup Mobile-Facts, compiled Android for an Asustek EEEPC 1000H netbook and got the system running with all the necessary hardware, including graphics, sound, and the wireless card for the Internet. They described their work in an article published by the site VentureBeat.

Netbooks, defined as having screens 10 inches or less and costing less than $500, with many models selling for as little as $300, are the fastest-selling segments of the PC market. While the rest of the market is expected to see a decline in unit sales, global sales of netbooks will grow nearly 80% this year to capture 8% of the total PC sales, according to the latest Gartner forecast.

Microsoft Strikes Web-Search Deal With H-P

Microsoft Corp., hoping to gain ground on rivals Google Inc. and Yahoo Inc., announced a deal with Hewlett-Packard Co. to add built-in links to its Internet search service on H-P consumer computers sold in the U.S. and Canada.

Microsoft said it will design a custom toolbar for its Live Search service that will sit atop Web browser windows on new H-P machines. Yahoo, second to Google in the Web search market, has had the default position on H-P personal computers since 2006, a spot it will retain until Microsoft replaces it in January.

"This deal comes at Yahoo's expense," said Sandeep Aggarwal, an Internet analyst at Collins Stewart.

A Yahoo spokeswoman said the company will continue to have a business relationship with H-P, but didn't comment on why Yahoo gave up the search deal or on its relationship with Microsoft.

Google currently accounts for 62% of all searches in the U.S., while Yahoo has 20% and Microsoft 9%, Mr. Aggarwal estimates. That makes it important for Microsoft -- which recently mounted and then withdrew a buyout bid for Yahoo -- to increase its exposure with PC users. Typically, such deals involve search- engine makers paying fees to PC makers for each toolbar installed, along with additional fees for each Web search initiated by those toolbars. Google and Yahoo struck such deals around 2006; The Wall Street Journal reported that year that Google was paying PC makers $1 for every PC shipped with a Google toolbar, plus additional fees each time a user performed a search.

An H-P spokeswoman declined to detail terms of the deal, though she confirmed the Yahoo arrangement expires at the end of this year. Angus Norton, the director of the Microsoft team responsible for marketing Live Search, didn't give financial details of the deal, but said its structure is "more or less the same" as the agreements Google and Yahoo struck with PC makers.

Mr. Norton said his staff was already considering a request for toolbar-deal proposals from H-P when Microsoft leaders decided to speed their online push last month. In a May 18 memo sent in the wake of Microsoft's failed bid to buy Yahoo, Microsoft's president of platform and services, Kevin Johnson, outlined a strategy for his company to expand its Web presence without Yahoo.

"The discussions started before the date of his memo, but were certainly accelerated after the memo was published," Mr. Norton said. Last month, Microsoft announced a cash-back program for Live Search users who buy items they find via Microsoft searches.

Greg Sterling, an Internet analyst with Sterling Market Intelligence, said that given Microsoft's small market share, it makes sense for the company to " pay a premium" to get its search engine widely distributed. "They just have to show people that Live is a good search engine," he said. "They have to get people comfortable with using it." Still, he added, only about 14% of searches are initiated through toolbars.

Microsoft said the custom search toolbar for H-P machines will include Hewlett-Packard applications such as photo service Snapfish. The toolbar will use Silverlight, a browser plug-in that Microsoft has designed, to run animation programs.

Microsoft's Mr. Norton said he doesn't anticipate the toolbar deal will run into the antitrust problems that Microsoft had with past attempts to make its browser the default on consumer PCs. In the late 1990s, PC makers that wanted Windows were required by license terms to follow Microsoft's restrictions involving browsers, requirements later found to be illegal. Now, by contrast, the company is on an equal footing with rivals in paying PC makers for a prominent position for its search service. "We're simply the small guy trying to compete with the big guy here," Mr. Norton said.

By: Justin Scheck
The Wall Street Journal; June 03, 2008