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Google Android Claws at Microsoft Soft Spot

Google's Android could prove a problem for the more expensive Microsoft Windows.

Cheap is the force behind netbooks, and

Google's

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Android fits the bill.

Android is the newest flavor of Linux-based PC operating systems, and if it tasty enough, it could curb the appetite for

Microsoft

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Windows.

Hewlett-Packard

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confirmed late Tuesday that it is

studying the Android system

for some of its netbooks. H-P is the No. 1 PC maker and eager to find an entry point in the low-cost sub-$400 netbook race. No. 2 player

Dell

is also expected to make its own push into netbooks facing the same cost concerns.

The economics of netbooks favor Android over the more expensive Microsoft Windows option.

Google's Android on netbooks "is the single biggest competitive threat to Microsoft ... beyond the rise of Apple in recent years," Collins Stewart analyst Sandeep Aggarwal wrote in a research note Wednesday.

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To date, Linux-based netbooks have not significantly dented Microsoft Windows XP's popularity. But if Google's version catches on, it will have a measurable impact on Microsoft's bottom line, Aggarwal wrote.

"Every 10 million netbooks shipped without Windows translates into $230 million in lost revenue and $0.015 in lost earnings per share for Microsoft," Aggarwal estimates.

Microsoft's

best hope

to sustain its operating system leadership lies in its upcoming Windows 7 system. The Windows Vista successor is expected to work on a range of systems, including netbooks.

Microsoft can't afford to lose its grip on the growing netbook segment, given the threat Android already poses to its mobile phone software. In January,

Motorola

(MOT)

announced it was

building all its new smartphones

with Android operating systems this year.

The growth of netbooks has attracted

Apple

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to the game. The Mac maker is reportedly working on a

touchscreen version

of the device.

Microsoft shares were down a dime to $18.27 in early trading Wednesday.