Google attacks Microsoft with new browser-based operating system for low-cost computers

Google’s new operating system to take on Microsoft

SUN VALLEY, Idaho — Google Inc. is working on a new operating system for inexpensive computers in a daring attempt to diminish Microsoft Corp.’s longstanding control over people’s computer experience.

The new operating system, announced Tuesday night on Google’s Web site, will be based on the company’s 9-month-old Web browser, Chrome. Google intends to rely on help from the community of open-source programmers to develop the Chrome operating system, which is expected to begin running computers in the second half of 2010.

Shares of Google jumped $6.92, 1.8 percent, to $403.55 in morning trading Wednesday, while Microsoft fell 15 cents to $22.38.

Google is designing the operating system primarily for “netbooks,” a lower-cost, less powerful breed of laptop computers that is becoming increasingly popular among budget-conscious consumers primarily interested in surfing the Web.

Google has already introduced an operating system for smart phones and other mobile devices, called Android, that vies against various other systems, including ones made by Microsoft and Apple Inc.

The Android system worked well enough to entice some computer makers to begin developing netbooks that will run on it. For instance, Acer Inc., the world’s third-largest PC maker, said last month it would make netbooks that run Android instead of Windows. Acer said Android would make the computers less expensive and possibly help them boot up faster.

Google, though, apparently believes a Chrome-based system will be better suited for netbooks.

That is a direct challenge to Microsoft, whose next operating system, Windows 7, is being geared for netbooks as well as larger computers. And it would be Google’s boldest confrontation yet with its biggest nemesis.

Microsoft had no immediate comment Wednesday.

A duel between the two technology powerhouses has been steadily escalating in recent years as Google’s dominance of the Internet’s lucrative search market has given it the means to threaten Microsoft in ways that few other companies can.

Google already has rankled Microsoft by luring some of its top employees and developing an online package of computer programs that provide an alternative to Microsoft’s top-selling word processing, spreadsheet and calendar applications.

Meanwhile, Microsoft has been trying to thwart Google by investing billions of dollars to improve its own Internet search and advertising systems — to little avail so far.

In the past month or so, though, Microsoft has been winning positive reviews and picking up more users with the latest upgrade to its search engine, now called Bing. Microsoft is hailing the makeover with a $100 million marketing campaign.

Now Google is aiming for Microsoft’s financial jugular with Chrome its operating system.

Microsoft has drawn much of its power — and profits — from the Windows operating system that has steered most personal computers for the past two decades.

Google’s chief executive, Eric Schmidt, and its co-founders, Larry Page and Sergey Brin, have not concealed their disdain for Windows.

Schmidt maintains Microsoft sometimes unfairly rigs its operating system to limit consumer choices — something that Microsoft has consistently denied doing. Google fears Microsoft could limit access to its search engine and other products if Windows is set up to favor Microsoft products.

Google made a veiled reference to Windows’ perceived shortcomings in its blog posting Tuesday.

“We hear a lot from our users and their message is clear — computers need to get better,” wrote Sundar Pichai, Google’s vice president of product management and Linus Upson, Google’s engineering director. “We believe choice will drive innovation for the benefit of everyone, including Google.”

Schmidt and Brin are expected to discuss Google’s new operating system this week when they appear at a media conference hosted by Allen & Co. at the Sun Valley resort in Idaho.

Despite its own power and prominence, Google won’t have an easy time changing the status quo that has governed personal computing.

As an example of how difficult it is to topple a long-established market leader, Google estimates about 30 million people are now using its Chrome browser — a small fraction of those that rely on Microsoft’s market-leading Internet Explorer. And there have been various attempts to develop open-source software to undermine Windows on PCs, with relatively little effect.