Chromebook: so bad that it's good
Alphabet has seized a big chunk of the laptop market.
Has this ever happened to you? You need to buy a laptop, fast.
I was in that position this weekend, after some last-minute travel arrangements.
The experience has given me a new perspective on one of my top portfolio holdings, and one of my favourite investments: Alphabet ($GOOGL). Allow me to explain.
I’ve had the same laptop for six years. It’s a Lenovo, running Windows, with a 1.1GHz processor.
But now it’s slow, really slow. And I have deadlines to meet.
Enter the Chromebook. It’s a glorified tablet, with a keyboard attached, according to some. And they are right.
Chromebook: the basics
A Chromebook is a laptop whose primary function is to allow the user to browse the web using Chrome (the clue is in the name).
It uses the eponymous Chrome OS (Chrome Operating System), so it’s not a Windows computer nor is it a Mac.
This brings with it certain advantages, and certain disadvantages. Let me talk about the bad, first.
A smaller world
There are major restrictions when it comes to the software you can use on a Chromebook. In normal use, you can only get new apps from the Google Play Store.
It could be worse - there are 3.5 million apps in the Play Store, after all. But it’s still much more limited than a Windows computer.
This has consequences for people who fall into certain categories: hardcore gamers, developers and anyone with specific software needs, and anyone who carries out intensive tasks such as video development.
For these people, the Play Store isn’t good enough. They need more.
There are other disadvantages, but the limited flexibility when it comes to software is the most fundamental drawback.
Why it’s a winner
Now let’s get to the good stuff.
Because somehow, despite so many people hating Chromebooks, they surged to a hugely significant market share of global notebook shipments:
Some reasons for this:
Because of the simplicity of a Chrome-based system, the hardware needed by a Chromebook is much lighter than its competitors. Remember: it’s just a tablet with a keyboard!
Cheaper hardware means a cheaper computer. The typical budget Chromebook costs merely $200-$300. This means huge savings for the institutions who use them.
2. Speed, reliability and battery life
A simple operating system brings many other benefits, aside from price. Power up your Chromebook and you’ll find that you’re waiting less than ten seconds. Schools and businesses appreciate that, too.
And they know it’s going to just work. Since it’s such a simple machine, there is very little that can go wrong. Tech support costs just got crushed.
Additionally, many models will stay on for about 10 hours, on average, before needing to be recharged.
Who it is for
The users who need a Chromebook, in my opinion, are:
People who can be highly productive while only using web-based apps and the standard office apps available on the Play Store. Executives often fall into this category, and others who mostly just need to be able to read and communicate.
People who want to save money (who doesn’t?), or who place a high priority on speed and battery life. Chromebooks offer good value even in the premium $500-$700 price range, compared to their Windows counterparts at those price points.
What I Bought
For my first Chromebook purchase, I tested the concept with a budget model. I bought the Acer 314 for €186 plus VAT.
This model has a 2GHz processor and 64GB of local storage. It has a very bright screen, a nice keyboard and touchpad, and is incredibly fast. At this price, it is an absolute steal.
The same model can be purchased in the UK for the insane price of £157.50.
You will not find an adequate Windows laptop at these prices.
Alphabet ($GOOGL): My highest-conviction US monopoly
As readers will know, I’ve been a shareholder in Alphabet for a while now.
It already controls a wide range of monopolistic markets, and is now making serious inroads into the laptop market, outselling Macs in 2020 and stealing market share from Windows.
It’s true that Chromebook shipments crashed in Q1 2022, after the Covid-related buying spree reversed. When the industry has normalised to a post-Covid environment, the positive momentum should pick up again.
More Chromebook sales means more people using Chrome by default, more people being steered to YouTube, more people using Google Drive, and more people using the Play Store. Every Chromebook sale is a huge win for Alphabet, strengthening all of its other services.
At a P/E multiple of less than 20x, this remains my favourite US stock and my top choice in the US markets.
What do you think? Let me know in the comments!
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