Asustek has allocated engineers to develop an Android-based netbook, Samson Hu, head of the Taipei-based companys Eee PC business, said in an interview yesterday. Asustek hasnt decided whether to proceed with a final product because the project is still under development, he said.

An Android-powered notebook would extend Googles rivalry with Microsoft into the market for software that runs personal computers, where Windows controls more than 90 percent of the market. Netbooks, scaled-down laptops that offer basic e-mail and Internet functions, are the fastest-growing segment of the PC industry, with shipments projected to almost double this year as the overall market slows.

“With the strength of Google behind it, Android could really challenge Microsoft and steal some market share,” said Calvin Huang, a computer-industry analyst at Daiwa Securities Group Inc. in Taipei. “The benefit is the free license and you can use a lower-power, cheaper processor.”

Asustek shares have lost 9 percent this year to close at NT$33.50 today in Taipei trading. Microsoft has lost 7.9 percent to $17.91, while Google has gained 11 percent to $342.64 as of yesterdays close in Nasdaq Stock Market trading.

Free Software

Google introduced Android in 2007 as a software system for phones. Android is based on Linux, an “open-source” operating system thats free and developed by hundreds of engineers worldwide. Microsoft offers an operating system for handsets called Windows Mobile.

HTC Corp., based in Taoyuan, Taiwan, is the first company to produce Android-based phones, selling two models through operators such as T-Mobile USA Inc. and Vodafone Group Plc. Samsung Electronics Co. and LG Electronics Inc. are also planning to introduce Android-based handsets this year.

Freescale Semiconductor Inc., the Texas-based computer-chip maker taken private in 2006, said this week it began discussions with Taiwans Pegatron Corp. to create a netbook design that can use Android. Freescale expects to be producing chips for the device in large quantities by the second quarter.

Google, based in Mountain View, California, designed the Android platform to be used in phones, with the capability for the software to be adapted for netbook-style products, company spokeswoman Carolyn Penner said in an e-mail.

Smaller Screens

Netbooks have smaller screens, lower storage and less processing power than standard laptops, making them cheaper while less suitable for high-end tasks such as watching movies or playing games.

Hewlett-Packard Co. and Dell Inc., the two biggest PC makers, both introduced netbooks last year. Hewlett-Packard spokeswoman Marlene Somsak declined to comment on the possibility of using Android. Dell spokesman David Frink and Stella Chou from Taipei- based Acer Inc., the worlds third-largest PC maker, also declined to comment.

Asustek introduced the Eee PC in October 2007, initially only offering netbooks running on Linux. After Microsoft jumped into the market, Windows had 85 percent of mini-notebook market during the fourth quarter, while Linux accounting for the rest, according to estimates at research firm Gartner Inc.

Opposite Direction

“Youve got Microsoft starting out in bigger devices and moving into smaller devices,” according to Neil Mawston, a telecommunications analyst at Strategy Analytics Ltd. in Milton Keynes, England. “Google is, in many ways, moving in the opposite direction.”

Based on data compiled by Bloomberg, Google had $8.7 billion in cash at the end of December, higher than Microsofts $8.3 billion, which can be spent on research and development of new products beyond the search engine that generates 97 percent of Googles revenue.

Microsoft, which last month announced 5,000 job cuts after sales in the division that makes Windows fell 8 percent, said it expects to keep its lead. While Google offers alternatives, Microsofts Office software continues to dominate the market for word processors and spreadsheets.

Microsoft Confident

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