End Runs Around Vista?

BusinessWeek recently ran an article that indicated that HP may be working on a version of Linux to ship on its hardware:

The ecosystem that Microsoft (MSFT) has built up around its Windows operating system is showing signs of strain. In one of several recent moves by partners that sell or support the company’s software, Hewlett-Packard (HPQ), the world’s No. 1 PC maker, has quietly assembled a group of engineers to develop software that will let customers bypass certain features of Vista, the latest version of Windows. Employees on a separate skunk works team are even angling to replace Windows with an HP-assembled operating system, say three sources close to the company.

HP acknowledges the first effort. The company formed the “customer experience” group nine months ago and put at its helm Susie Wee, a former director in the company’s research labs. Her team is developing touchscreen technology and other software that allows users to circumvent Microsoft’s operating system to watch movies or view photos more easily than they can with Vista. “Our customers are looking for insanely simple technology where they don’t have to fight with the technology to get the task done,” says Phil McKinney, chief technology officer in HP’s PC division. After Vista was introduced last year, it drew criticism for slowing down computers and not working smoothly for certain tasks.

McKinney says any discussions about building an operating system to rival Windows are happening below senior-management levels. He doesn’t deny some employees may have had such conversations, but he says HP isn’t devoting substantial resources to such projects. “Is HP funding a huge R&D team to go off and create an operating system? [That] makes no sense,” he says. “For us it’s about innovating on top of Vista.”
WEANING FROM WINDOWS?

Still, the sources say employees in HP’s PC division are exploring the possibility of building a mass-market operating system. HP’s software would be based on Linux, the open-source operating system that is already widely available, but it would be simpler and easier for mainstream users, the sources say. The goal may be to make HP less dependent on Windows and to strengthen HP’s hand against Apple (AAPL), which has gained market share in recent years by offering easy-to-use computers with its own operating system.

HP’s moves come as several of Microsoft’s closest partners are stepping up their support for Windows alternatives.

To be honest, I’m almost surprised that HP or Dell hasn’t done something like this already. It’s clear that consumers do not like Vista and Apple is making huge strides recently. Moving to an in house Linux variant would give an OEM more control over their own destiny, better integration with their own hardware, product differentiation and higher margins. That being said, it would also come with the potentially steep downside of annoying Microsoft, who has proven they are willing to punish OEM’s for seriously considering alternative desktop Operating Systems in the past. We may be reaching a turning point though. At some point soon I think you’ll see that Microsoft just may be more dependent on the OEM’s than the other way around.

So, that brings us to the following question: why is HP letting this news out in this way. It could be a couple of things. It could be testing the waters to see how Microsoft will react. However, it could just be using this as a barging chip to get a better OEM deal on Windows, or more co-marketing dollars out of Microsoft. I’m not sure which direction I’m leaning at the moment, but I think it’s clear that one of the major OEM’s are going to do this very soon. With the recent announcement by Ubuntu that it is going to try to refine the Linux desktop experience to be more inline with the Apple experience, things look to be coming together nicely. The first OEM that sincerely jumps in the water on this one is going to have a significant lead IMHO.

–jeremy