Asus Low-Cost Hololens Is A Win-Win For Microsoft

  • Microsoft and Google are expected to release their AR devices next year.
  • While Microsoft and Google attract most of the attention, many other companies strive to penetrate that market too.
  • Asus AR headset with Windows 10 might impact Hololens sales but increase Win10 ecosystem efforts.

The year 2016 is just around the corner, and we are getting closer to witnessing how the virtual (VR) and augmented reality (AR) products are accepted by consumers. While there are a number of players in the VR market, like Facebook (NASDAQ:FB), Oculus, Samsung Electronics (OTC:SSNLF), Sony Corp (NYSE:SNE), HTC, and many more, the AR market is more centralized with two main players, Alphabet Inc-C (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT).

Google is expected to start rolling out its Google Aura (formerly Glass) products next year when the first flavor to hit the markets will probably be the one for the Enterprise that was more successful with the end-customers than the consumer flavor that received a lot of criticism. The other main player in the market, Microsoft, is also expected to release its Hololens product next year, which is to be a building block in its Windows 10 ecosystem expansion.

Most of the market is focused on these two companies that will probably compete for market leadership. However, both of them are expected to play in the high-end segment of the market, offering relatively expensive solutions.

As we noticed in other evolving consumer electronics markets, like smartwatches, smart TVs, etc., there is a lot of demand for low-priced solutions that are usually not significantly inferior to the solutions with higher price tags. Looking at the other AR solutions that are expected to be released next year, we can notice solutions from known vendors, like Lenovo and Epson, while many small vendors, like Vuzix and Optinvent, for example, will try to mimic Pebble’s and Fitbit Inc (NYSE:FIT) success in the smartwatches market.

While many device companies (big and small) will try to gain market share from Google and Microsoft, the most prominent vendor to become a serious player in this market is Asus. The Taiwanese electronics company is the sixth largest PC vendor worldwide, and it’s mostly known for its branded computers, servers, tablets, and PC peripherals.

As the entire tech world shifts from PCs to portable smart devices, Asus's strong positioning in that market is not enough, and the company is expanding into new emerging markets, like smartwatches with its ZenWatch, and now it intends to penetrate the AR market with a low-cost headset (according to the company) to compete with Google and Microsoft.

Asus AR device is expected to be a low-cost version of the Microsoft Hololens – running Windows 10 and sharing some of the engineering with its high-end brother from Microsoft. In a recent earnings call, the Asus CEO refused to comment specifically on the Microsoft collaboration and only said: “It should be next year when we come out with a product. We think AR will be very important for people's lives.”

Microsoft has mentioned a number of times that it intends to create a whole new category with Hololens and not compete with Google Aura. If this is indeed the case, Asus will be the first direct rival to Microsoft Hololens; however, as Asus plans to run Windows 10 on its new AR device, Microsoft could benefit from the move.

As I mentioned in an earlier article, Microsoft is working very hard to expand its Windows 10 ecosystem to compete with iOS and Android, which will enable the company to compete for the transition it’s going through and use its software as an enabler for other revenue streams like app store revenues, OEM licensing fees, and hardware sales.

Asus' product might impact Microsoft’s Hololens sales; however, it will increase Windows 10 ecosystem penetration. By penetrating into an evolving segment of the AR market where consumer habits are not set yet, it could turn out to be a very valuable move. For Microsoft, this is a win-win situation.

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