What does the HP Chromebook 11 delay mean for PC and tablet suppliers, as they become too hot to handle?
To maintain relevancy in the low-end and budget range of computing, Hewlett-Packard (HPQ) teamed up with Google (GOOG) to sell the Chromebook 11. The computer is an inexpensive $279 ultraportable.
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The specifications, along with the price, should be competitive enough to win over consumers considering a tablet or smaller laptop. But now sales for the laptop are on pause due to reports of the charger overheating. Looking beyond the temporary hold in sales, is there anything for investors to be concerned about?
Reports that some battery chargers were damaged due to overheating during use also caused Best Buy (BBY) to halt sales. The Chromebook is powered through a micro-USB connection, but the one that comes in the box could overheat. HP advised current owners to use a third-party charger instead.
HP should not have any problem resolving the charging issue if it moves quickly, so the impact on sales might not be significant. But in the laptop space, the Chromebook 11 may not be as competitively priced.
At a similar price range, a consumer could opt for a Windows-based computer powered by an Intel (INTC) Celeron processor. Inexpensive Windows-based computers have more functionality, including a fuller range of printing connections and support for Windows-based programs.
But HP has plenty of opportunities to develop better Chromebooks in the future to remain competitive. If sales for the Chromebook 11 are weak due to consumers wanting better specifications, HP could power the next Chromebook with an Intel Haswell chip. The company could also improve the screen resolution.
HP continues to be valued at a very low forward P/E of 7. By comparison, competitor Microsoft’s (MSFT) forward P/E is 14 and Google’s is 25.
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Google and Acer (OTC:ACEIF) just announced a Chromebook for $199. This will mean more competition for HP on the low-end range of Chromebooks. The HP Chromebooks could find appeal for consumers in the 14-inch range, but HP will probably need to boost the specifications on the 11-inch model to compete effectively.
Written by Chris Lau.
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