The HP Chromebook 11 is the latest entry in Google’s (GOOG) Chromebook line of laptops, which run on Chrome OS and are built around other Google products like the Chrome web browser and Google Drive. Most Chromebooks fall in the $250 to $300 range and are marketed as fast, portable computers that make it easy to work on the go.
But the HP Chromebook faces stiff competition from tablets, which offer more functionality and better portability than a bare-bones laptop. Competitors like Apple (AAPL) and Samsung (SSNLF) have been gobbling up the market with iPads and Galaxy Tabs.
That’s bad news for HPQ.
Chromebook Keeps HPQ Stuck in PC Era
Hewlett-Packard is in the middle of a long-term turnaround, and it can’t afford many missteps along the way. HPQ stock is off 60% from its 2010 heydays, and more recently, Hewlett-Packard suffered a double-digit drop after disappointing earnings in August. The company is selling investors on the promise of its Moonshot microservers. But until those start turning actual profits (possibly years away), the company still is playing in a dying PC industry.
Yes, Chromebooks sales have picked up ever since prices dropped below $400, especially for Samsung and Acer. But the lower those prices go, the more they cancel out the margin gains that come from avoiding Microsoft’s (MSFT) Windows licensing fees.
So even if the HP Chromebook 11 follows the same uptrend as Samsung’s and Acer’s entries, it won’t mean huge profits — it merely will keep HPQ relevant.
And as tablets get more powerful, portable and less expensive, it’s only a matter of time before consumers start ditching laptops with limited functionality in favor of tablets that can do as much as they want for roughly the same cost.
The bottom line is that you probably either like the HPQ stock turnaround story thanks to long-term plans like Moonshot and its moves toward greater efficiency … or you think the stock is a relic of the PC age and is going nowhere.
Either way, the Chromebook news shouldn’t make a difference.
Adam Benjamin is an Assistant Editor of InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.