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Google to offer rival to Windows

Operating system to be designed first for netbooks

Google Inc. is working on a new operating system for inexpensive computers in an attempt to cut into Microsoft Corp.’s control over personal computing. Google’s focus is on encouraging software use on the Web, where ads draw the bulk of its revenue. Google Inc. is working on a new operating system for inexpensive computers in an attempt to cut into Microsoft Corp.’s control over personal computing. Google’s focus is on encouraging software use on the Web, where ads draw the bulk of its revenue. (Jens Meyer/Associated Press/File 2007)
By Brian Womack
Bloomberg News / July 9, 2009
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SAN FRANCISCO - Google Inc., owner of the most-visited Internet search engine, is developing a computer operating system based on its Chrome Web browser, taking aim at Microsoft Corp. in its strongest market.

The system will be designed at first for low-cost laptops called netbooks, Google said in a blog post. The company is in talks with partners on the project, and computers running the software will be available in the second half of 2010.

The plan escalates Google’s rivalry with Microsoft, which extends to Web search, browsers, and business applications such as word processing and spreadsheets. Windows, Microsoft’s flagship product, runs about 90 percent of the world’s personal computers. Google is also trying to spur Web-ad sales after reporting its first sequential revenue drop as a public company.

“There is a possibility that the new OS can break the paradigm Microsoft and Intel created over the past 20 years,’’ said Yukihiko Shimada, a computer analyst at Mitsubishi UFJ Securities Co. in Tokyo. “There is plenty of business opportunity for Google in this market.’’

Google said it is working with computer makers to introduce a number of netbooks next year, without identifying any of the companies. The Chrome OS will be open-source, meaning the program code will be open to developers, Google said. The software will work on top of the Linux operating system.

Frank Shaw, a spokesman for Microsoft, declined to comment. Windows accounted for 28 percent of the company’s $60.4 billion annual revenue in the past 12 months.

Microsoft has stepped up its efforts in the netbook market. It said in May it plans to remove a restriction of running three applications at a time on its forthcoming Windows 7 Starter Edition, which is designed for netbooks. The announcement eliminated one of the most significant differences between the basic edition of the operating system and a pricier one.

Google, based in Mountain View, Calif., rose $5.86, or 1.5 percent, to $402.49 in Nasdaq trading yesterday. Microsoft, based in Redmond, Wash., advanced 3 cents to $22.56. Google has risen 31 percent this year and Microsoft has added 16 percent.

The Chrome OS is consistent with Google’s focus on getting people to use software online, which contrasts with Microsoft’s approach of providing programs on the computer itself. Google started offering business software in 2007, allowing users to access spreadsheets and word-processing documents via the Web.

“We hear a lot from our users and their message is clear - computers need to get better,’’ Google said. “The operating systems that browsers run on were designed in an era where there was no Web.’’

Google is trying to encourage people to spend more time online to fuel demand for Internet ads, which accounted for more than 90 percent of its 2008 revenue of $21.8 billion. In the first quarter of this year, Google had its first sequential sales drop since it went public in 2004 as the recession prompted companies to curb advertising spending.

The open-source Chrome OS will probably win over companies that don’t want to pay for Windows, said Jim Friedland, an analyst at Cowen & Co. in New York. The system may also help Google sell Web-based applications, such as the Gmail e-mail service, that run on top of it, he said.