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The quiet Ubuntu Netbook revolution

Ubuntu is killing Microsoft in the Netbook market, but the damage may not be obvious, as 90 percent of all Netbooks are apparently shipped with Windows.

Revolutions don't always roil and boil toward a noisy, violent fracas. Sometimes they don't even ripple the surface.

Such is the Ubuntu Netbook revolution, which makes waves in the Linux community--and really nowhere else. Not publicly, at least.

I was fortunate to spend two hours on Tuesday night with Chris Kenyon, head of Canonical's Ubuntu business for original-equipment manufacturing, or OEM. Kenyon, in addition to being a fellow Arsenal fanatic, is also Ubuntu's point man for its quiet, but nonetheless dramatic, Netbook revolution.

Kenyon, who appeared a placid, affable chap when we first met outside Arsenal stadium to witness a shattering of Hull City's FA Cup hopes, eventually let his competitive side out during the match, cheering the team and jeering the referee. Brilliant. It was then that I got a taste for what Canonical's competitors, and particularly Microsoft, might be in for when competing with Ubuntu.

In the Netbook market, Ubuntu is the clear winner, with Hewlett-Packard, Dell, and the other major hardware OEMs shipping Ubuntu-based Netbooks. But it's not yet clear what "winner" means. Microsoft, after all, still apparently claims 90 percent of all Netbooks shipped with Windows.

Therein, however, lies the seed of Ubuntu's revolution. Ten percent market share for Linux is pretty incredible. We rightly cheer Apple for its steady onslaught of Microsoft in the personal-computing market, and that's as Apple struggles toward 10 percent market share. Linux is already there in Netbooks, and Ubuntu claims the bulk of those installations.

There are indications that this could accelerate. I won't comment on the royalties Canonical currently earns on its Netbooks, except to suggest that its competitive price point must be extraordinarily Microsoft. Manufacturers continue to ship Windows XP and pay Microsoft virtually nothing for the privilege due to discounts, rebates, and other incentives. With Ubuntu exerting downward pricing pressure, Microsoft doesn't stand to gain much in the growing Netbook market.

Let's say Microsoft earns $8 per copy of Windows XP shipped, which might actually be high, at least with the larger OEMs. At that point, the price differential between shipping Ubuntu or Windows XP is slim. But once Microsoft eventually turns off the XP spigot and requires OEMs to ship Windows 7, will Microsoft be able to command a hefty premium on its brand alone?

I doubt it. Canonical has permanently reset the Netbook operating system price point in its favor, at a level where it can compete vigorously while Microsoft must compete reluctantly. Microsoft, in short, is now playing by Ubuntu's terms.

Now let's compound the problem for Microsoft. Taiwanese original-design manufacturers are actively deploying Ubuntu for their OEMs (HP, etc.). They are now gaining experience and expertise in testing and quality assurance for Ubuntu. The mechanics of shipping Linux, in other words, are beginning to be well-understood. This, coupled with consumers' growing comfort with Linux in the Netbook form factor, make it hard to justify the inertia of staying with Microsoft just because it's Microsoft.

Netbooks are disruptive, in part, because they define productivity in terms of the Web, not Microsoft Office. The more users want to spend time in a browser, or instant messaging, or e-mail, the less Microsoft Windows is required. The less Windows is a requirement, the less that OEMs are going to be willing to pay for Windows licenses. Microsoft suffers (indeed, it may already be suffering), OEMs gain (because they earn better margins on their Netbooks), and customers gain (all the functionality they need at an attractive price).

And, of course, Canonical gains. There's a revolution going on. It's quiet, but it's happening.

Follow me on Twitter at mjasay.