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Apple Inc. (AAPL)’s Biggest Nightmare

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Right now, I’m writing this from the PC of the future — the Google Inc (NASDAQ:GOOG) Chromebook Pixel. This article isn’t meant to be an advertisement for the Pixel — frankly, I wouldn’t recommend it to anyone — but the Pixel’s very existence represents a dramatic shift in the PC industry — a shift that could ultimately disrupt Apple Inc. (NASDAQ:AAPL)’s entire business model.

Apple Inc. (NASDAQ:AAPL)

Chromebook Pixel: the ultimate halo product

The Chromebook Pixel is the ultimate halo product. It’s intended to show off the potential of a Chromebook, but not actually sell well. Google investors, then, shouldn’t put any stock at all in the Pixel’s sales figures.

Although the Pixel is a fantastic looking device with a screen superior to the Retina Macbook Pro, as I said, I don’t think anyone should buy it. Because, for $1,300-$1,500, consumers get a laptop that can’t run any programs.

More useful than you might imagine

Can’t run any programs you say? Why on earth would anyone want one? Despite the fact that the Pixel can’t run Microsoft Corporation (NASDAQ:MSFT) Office, Skype, or PC games, the laptop is surprisingly capable.

The Pixel runs Chrome OS, Google’s other operating system (the first being Android). Although “OS” is tacked on the end, Chrome OS is more or less just Chrome, Google Inc (NASDAQ:GOOG)’s popular Internet browser.

The truth is, for many people, that’s all they need. This piece, for example, is being written in Google Docs — Google Inc (NASDAQ:GOOG)’s Internet-based alternative to Microsoft Corporation (NASDAQ:MSFT) Office. Earlier, I was chatting with a friend using Facebook Inc (NASDAQ:FB) messenger. After this, I might go watch some Netflix, Inc. (NASDAQ:NFLX) or play a Zynga Inc (NASDAQ:ZNGA) game — all possible with Chrome OS.

Computing is shifting to the cloud

It’s no secret, but the growing trend in computing over the last few years has been a transition to the cloud. Of course, many people misunderstand exactly what this entails. They hear “cloud” and think iCloud — Apple Inc. (NASDAQ:AAPL)’s cloud storage system.

Rather, the cloud represents a different form of computing entirely — applications are no longer run on the user’s own PC, but instead, on some distant server.

This brings us back to the Pixel, and why it’s so absurdly overpriced. Although its robust internals make it snappier than rival Chromebooks, the experience one gets on a Pixel is fundamentally no different from the experience one gets on other Chromebooks. Google Docs and Facebook Inc (NASDAQ:FB) Messenger are just as available and useful on the $1,500 Pixel as they are on Samsung’s $250 Chromebook.

Gets better with time

The most interesting thing about the Pixel is that it’s perhaps the only PC out there that will actually get better over time.

Time is the enemy of most PCs — parts wear out, the machines become too dated to run the latest applications. To be fair, the

Intel Corporation (NASDAQ:INTC)

i5 powering this Pixel will slowly wear out in the coming years, but the applications the Pixel can run will only increase — not decrease over time.

This is because an increasing number of applications are being brought to the cloud. Microsoft doesn’t offer a full version of Office on the cloud (yet), but it does have Office Web Apps, a simplified version that can be run through a browser.

In time, Office will likely become fully cloud compatible, along with Microsoft Corporation (NASDAQ:MSFT)’s other applications. Microsoft has demonstrated they take the cloud seriously, and are rumored to be working on a full cloud-based version of Windows.

Then there’s Microsoft Azure — not an application most end-users would be familiar with, but its potential was enough to draw the hedge fund ValueAct into the name. Azure is a product for developers — it allows them to create cloud-based applications on Microsoft’s server.

As more developers create cloud applications, ValueAct believes that Azure will turn out to be a gold mine for Microsoft.

A total disruption of Apple’s business model

If Apple Inc. (NASDAQ:AAPL) doesn’t radically alter its business model, cloud computing could dramatically disrupt it.

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