The Chromebook gains and Microsoft responds

More evidence this week showed that the Chromebook continues to make inroads into traditional Windows markets. And Microsoft is responding.

First, let's look at a report that came out this week from market researcher NPD.

Sales of chromebooks -- inexpensive laptops that run the Google Chrome operating system -- jumped 250 percent year-over-year within the "US commercial channel," in the three weeks ending June 7, according to NPD.

Why is the Chromebook doing so well in the US commercial channel? In a word, schools.

"In [those] channels they appear to be primarily an education product," NPD analyst Stephen Baker, said in response to an email query.

Chromebooks are also gaining outside of education. "They are doing very well at retail [too]. They represent about 5 percent to 7 percent of retail notebook sales (about 25 percent of all under $300 ASP retail notebook sales)," Baker said in an email message.

The NPD report goes on to say that the Chrome OS "has become a legitimate third platform," challenging both Windows and Mac OS X (and iOS).

But the Windows market is the main target because it's the biggest with the most to lose. Why? Chromebooks offer a traditional Windows clamshell design at a very low price -- often below many competing Windows laptops. And they're offered by the very same companies -- HP, Dell, Acer -- that sell Windows laptops.

Don't think Microsoft is just a little bit concerned? Think again. Dell, a major purveyor of Windows laptops, said this week that it had to halt sales of its Chromebook because it couldn't meet demand.

Here's what Dell said to CNET in a statement: "Due to strong demand, the Dell Chromebook 11 is currently not available for order on Dell.com. It continues to be available for our Education customers and can be ordered through their sales representative. We will offer it for sale again on Dell.com as soon as possible."

So, Microsoft is worried. Worried enough to dedicate a Web page to explainingwhy you should opt for an inexpensive Windows laptop over a Chromebook.

To wit:

"A Windows laptop is for...getting things done with Microsoft Office, connecting to workplace networks, using rich tools to edit your photos and videos online and offline, calling your friend in Paris with Skype... organizing your files on your laptop for easy access even when you're offline, playing Halo, working both online and offline, using iTunes and Photoshop, and countless other things you get only with a full-powered PC."

And price, as usual, is very important. Chromebooks start at $199. Microsoft responded to that challenge this week.

Microsoft COO Kevin Turner addressed this issue at the company's Worldwide Partner Conference, showing off Stream, a $199 HP laptop running Windows 8.1 that will be available this holiday season to challenge the Chromebook. Other products will likely follow.

And I expect the Chrome argument to only get stronger, as Chrome incorporates more Android elements into the operating system. And, yes, Microsoft should be worried.