Google's Bigger Opportunity: Chrome OS, Not Android

NEW YORK ( TheStreet) -- In terms of computing market share, Google ( GOOG) is on a roll. Consider the advancements in smartphones, tablets and laptops:

1. Android came from nowhere in early 2009 to total domination in smartphone market share today, in almost every country around the world. That's like U.S. military strength from 1941 to 1945.

2. After some early stumbles, Android, in conjunction with its hardware partners such as Samsung and Asus most prominently, have finally started cracking the code on the tablet market with Nexus and other tablets. The market share is still moderate, but it appears to be gaining against the iPad every day.

3. Samsung, Acer and most recently Lenovo ( LNVGY) are now stamping out Google PCs based on Chrome OS. While market share is modest overall, there is a breakthrough in the education market, and with the enterprise and consumer markets in sight.

So where does Google go from here? Will it simply continue to grow linearly in these three silos described above?

We have to examine the potential for Google's two operating systems, Android and Chrome OS. Let's start with the first important distinction, touch vs. keyboard.

If you are doing "typing" work, such as typing this article, working on a spreadsheet, creating a presentation or working with multiple browser windows side by side with each other -- or with large and/or multiple displays/monitors -- touch is not the right way to go. You need a keyboard and either a trackpad (laptop) or a mouse (desktop).

A finger simply isn't as precise at grabbing text, editing, pointing and selecting. In addition, your arms will go bonkers constantly reaching forward to a screen. The bigger the display/monitor, and the more of them you are using side by side, the worse the touchscreen scenario becomes.

On the other hand, a touchscreen is the dominant way to use a smartphone. More about the BlackBerry keyboard scenario later.

In between the smartphone and PC scenarios reside the tablets. Some tablets -- say, those smaller than nine or so inches -- will realistically be used in finger mode almost all the time. Larger tablets, such as the large/original iPad and some Windows 8 devices, can also be used in "convertible" mode, with a keyboard that attaches or folds.

What can we gather from this? Let's start with Android.

Android is suitable for almost every kind of smartphone, with or without keyboard, because the screen will most likely be touch-enabled. Android is also suitable for all sorts of tablets, because touch is optimal when it is used in non-keyboard tablet mode.

But what about Android for the PC desktop, where touch is not really necessary? There seems to be no incremental benefit from bringing touch to the PC desktop. As a result, we are not likely to see "traditional" laptops (i.e., those with "normal" fixed laptop form factors) using Android. That's the province of Chrome OS, such as the laptop on which I am now typing this article.

This leaves us with one radical possibility, and that is Chrome OS on tablets and smartphones. Let's dissect this argument further:

First, tablets: We have already established that tablets need to have at least one touch mode. This could be Android -- or it could be a new version of Chrome OS that is also touch-optimized. However, if you want to create the "ultimate" convertible tablet/laptop with, say, a screen at least approximately 11 inches, then you also have a second option: A "traditional" laptop mode using a keyboard/trackpad, not requiring touch.

So here is what Google could do, in conjunction with its hardware partners such as Samsung in particular. Let's say you have an 11- or 12-inch tablet that can work in two modes:

(1) Mode 1 is Android, which uses the touchscreen but can also accommodate a keyboard.

(2) Mode 2 is Chrome OS, which doesn't need to use a touchscreen because it's optimized for small display targets ideal for trackpad/mouse.

One alternative here is that Mode 1 above could also be a new, touch-optimized version of Chrome OS. Either way, the good news here is that they could co-exist on the same CPU/GPU. For example, the Exynos from Samsung, the Snapdragon from Qualcomm ( QCOM) or the Tegra 4 from Nvidia ( NVDA) could make available dual-boot between Android and Chrome OS.

What about the smartphone?

For a non-keyboard smartphone, Chrome OS would have to be significantly re-written to become touch-optimized. This is entirely possible. If so, it could either be a pure Chrome OS smartphone or one that could dual-boot into Android, so that people could switch back and forward as they pleased or just stick to one, if that's what they prefer.

For a keyboard smartphone, this could be Google's ultimate BlackBerry-killer. Remember, until a couple of years ago, BlackBerry was not touchscreen, and that's what most people are still happy using around the world for their BlackBerrys. It could be made uniquely cheaply, even more so without that touchscreen.

Speaking of cheaply, this leads us to a core question in this argument: Why bother expanding Chrome OS to tablets and smartphones to begin with?

The answer is found inside the realm of simplicity, security and cost. If you think Android is cheap to make today, that's true, but it could be much cheaper still, and this is what counts for billions of people around the world.

Chrome OS could have lower hardware requirements to run well, especially on such a smaller screen. There is less need for local storage. Instead of 16 or 32 gigs on board, 2 or 4 gigs might be more than plenty.

It's well-known that security is superior on Chrome OS, with no local app installs. Some other people still are uncomfortable installing, updating and monitoring applications -- including troubleshooting those that behave badly, take up too many resources, or pose potential security risks.

Apart from the interface issues, what would Chrome OS need to change to become optimized for tablets, let alone smartphones? The one thing I see is local storage for media.

If you are carrying a Chromebook today, you most likely have your podcasts, music and TV/movie shows on your smartphone or tablet, such as an iPhone or iPad.

You need local storage to keep you happy listening/watching podcasts at the gym or when you are on the plane or on the subway, just to mention three of the critical-use cases. This would be completely new for Chrome OS, but it remains still today an ongoing challenge for Android as well, in comparison to iTunes and how it works with iOS devices.

I don't know if -- let alone when -- Google would be in a position to launch these Chrome OS-inclusive tablets and/or smartphones. What is clear is that Android has hit its product definition in terms of already being offered in the two basic form factors for which it is optimized: smartphones and tablets.

Chrome OS is only on PCs right now, but could in principle end up being larger than Android if Google expanded it to smartphones and tablets as I describe above.

Chrome OS smartphones and tablets would be cheaper to make, more secure and simpler to use than Android. This may not be appreciated -- or even desired -- by the tech elite who love exclusivity and complexity and will surely denounce this article as one resulting from mental illness. They are, however, traits that are important to the other seven billion people on Earth.

This is not an indictment or complaint against Android, which is doing just fine and continuing to take market share. It's just a description of how Google can ensure there's a growth leg beyond Android's eventual peaking in growth and market share. It will take years for this to unfold -- just as it took years for the iPhone to launch in 2007 and become big in 2010.

It's easy for Google's top management to get blinded by Android's current success. It happened to Microsoft ( MSFT) in the last decade or so. It happened to Research In Motion's ( RIMM) BlackBerry. It happened to Nokia ( NOK).

If Larry Page wants to ensure that it doesn't happen to Google, he should ensure that the Chrome OS team is afforded the same resources and freedom to enter new markets, as he has done for the Android team.

At the time of publication the author had positions in GOOG, AAPL, NVDA, QCOM AND MSFT.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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