Google's Chrome OS puts pressure on Microsoft

Google Inc.'s plan to introduce a free operating system for personal computers opens a new front in its longtime battle with Microsoft Corp.

Already rivals in search, e-mail and word processing, the two technology titans are now poised for combat over the key software that runs PCs.

Google announced its operating system, Google Chrome OS, late Tuesday, saying in a blog post that it would initially target netbooks, the portable low-cost computers that are popular for getting online. Eventually, the system would be refined for desktop computers, a market that Microsoft dominates through its Windows franchise.

Almost immediately, Silicon Valley started handicapping the impending high-profile duel. Could this be what finally brings Microsoft down?

If history is any guide, Google's success is far from certain. Indeed, both companies have repeatedly invaded each other's turf, usually to limited effect.

Google, in Mountain View, controls 65 percent of the U.S. search market, according to online measurement firm comScore Inc. Hoping to steal some of Google's thunder, Microsoft unveiled its own search engine in 2005, but it has so far failed to gain much traction, fielding only 8 percent of all queries in May.

Undaunted, Microsoft spent heavily on a search overhaul last month - renaming its engine Bing - and in the process elicited praise from many analysts for its improvement in design. Still, it's too early to say whether the revamp will transform Microsoft into a more serious challenger to Google or prove to be another expensive mistake.

Meanwhile, Google is trying mightily to chip away at Microsoft's desktop software such as word processing, e-mail, spread sheets and calendars. Google's sales pitch is that its products are online - unlike Microsoft's, which must be downloaded - and they are therefore accessible from anywhere.

Earlier this week, Google said that 1.75 million companies use its rival services, called Apps, which come in free and paid versions. But the numbers fall far short of Microsoft Office, which rules the business desktop market.

Spencer Tall, managing director at Allegis Capital, a venture capital firm in Palo Alto that invests in technology companies, said Google's initial attempt with Chrome OS isn't likely to deal much of a blow to Microsoft. Any inroads Google makes, he said, will take years, if it happens at all.
"Microsoft fights wars of attrition - they never give up," Tall said. "Does Google have that fortitude?"
Google's Chrome OS is to be based on its Chrome Web browser, which was introduced nine months ago. Outside developers will be invited to work on the code, with the finished product made available in the second half of 2010.

Success will depend on persuadingflipF computer makers to dump Microsoft Windows, on which many currently rely, for Chrome. Getting such agreements would better position Google to lure consumers to its other products.

"From Google's standpoint, it wants to consolidate its hold on the desktop and that means nudging Microsoft out of the way,"

said Chris Le Tocq, an analyst with Guernsey Research.
The rivalry has left bad blood between the two companies. Google executives often allude to Microsoft's antitrust conviction in 2000 and tried to thwart Microsoft's acquisition of Yahoo. Microsoft CEO Steve Ballmer, in turn, once famously vowed to bury Google CEO Eric Schmidt and to "kill Google" after an employee disclosed plans to resign and join Google, according to the employee's sworn testimony in a court case.

Google and Microsoft declined to comment for this article.

Google's executives cast their new operating system as a speedy alternative for people who spend most of their computer time online. It's similar to how they touted the Chrome browser, which has gained less than 2 percent of the market compared with 66 percent for Microsoft's Internet Explorer, according to Net Applications.

Short term, Le Tocq said that consumers will take time to adopt something to which they aren't accustomed.

"Does it mean that corporate America should be throwing out its PC operating system?" Le Tocq said. "No."

But longer term, he said the free Chrome OS puts pressure on Microsoft's core businesses, which is based on charging for Windows. Offering a reduced price version of Windows with fewer features is one counter move Microsoft may have to make, he said.

"It leaves a gap and Google is stepping into the gap," he said.