Why thin clients help Internet companies

Dec.27.04 | About: Microsoft Corporation (MSFT)

The Wall Street Journal has a piece this morning about the return of thin client computing, this time in the form of cheap PCs with limited processing power and storage. It argues that thin clients are once again becoming viable due to:

  • the ubiquity of broadband Internet connections;
  • improvements in reliability and declining prices of cheap PCs;
  • the availability of robust and free open-source operating systems and software applications;
  • the spread of platform-independent (browser-based) applications, and
  • security problems with Microsoft Windows.

Why does this article matter to Internet investors? Because Internet
services are the twin of thin clients. Low-powered PCs with small hard
drives are only useful if you can back up your files with Google, store your photos at Ofoto and your music at iTunes.

In fact, Internet services and thin clients are symbiotic. Cheap
client devices fuel the growth the Internet businesses by lowering the
cost of hardware. And thin clients are only attractive if Web services
obviate the need for local storage and processing.

And here's the point that many investors miss: the interests of Yahoo! and Google conflict with those of Microsoft.
Microsoft's operating system monopoly raises the price of PCs. But
cheaper PCs with open source software would help Yahoo and Google by
lowering the costs of Internet access and moving people towards cheaper
and thinner clients and greater reliance on Web-based services. Yet
another reason why the guys at Google are probably cheering the growing
popularity of Firefox...

You can read the full WSJ piece here (subscription required).