Google's dramatic announcement that it is developing its own operating system seems designed to target Microsoft squarely in its Achilles' heel: the shift to Web-based computing that threatens the very core of the software giant's business.
Competition between the technology titans has been heating up during the past six months with the release of Bing, Microsoft's new search engine, and a major push by Google to sign up business customers for its productivity software, taking on Microsoft's lucrative Office franchise. The companies are also battling over everything from e-mail and online maps to mobile software.
Analysts said Google's latest shot at Microsoft raises the stakes even further, because it targets Windows, in many ways the heart of Microsoft. And the move could prove to be good news for consumers, since more competition in the operating system market, long dominated by Microsoft, could lead to lower prices and increased innovation.
Google plans to go after Microsoft's operating system with what the Mountain View search giant is calling the Chrome OS, which will be based on the browser of the same name released last year. Normally, this might seem to be a shot in the dark. Microsoft has a history of successfully standing up to competitors.
But analysts say this time could be different. "What is important is the movement of software (programs) from the fat desktop client to the Web," said Gordon Haff, an analyst at Illuminata. Google itself has already developed programs like Gmail that run in a Web browser and compete with software like Outlook, which runs on a PC.
In addition, he said, "The real threat to Microsoft is that Google will keep Microsoft from being successful in new areas."
New areas like netbooks, for example, low-end portable PCs that are increasingly popular with cash-strapped consumers. Google executives Sundar Pichai and Linus Upson wrote Wednesday on a corporate blog that the company would first offer the new operating system on netbooks in the second half of 2010.
If all goes well, the Chrome OS will eventually power full-size desktops.
Chrome could attract computer users who want more speed and security than Windows currently provides. Google promised the software, which will be free, would boot up quickly and "get you onto the Web in a few seconds."
It also said it was designing the underlying security architecture so people wouldn't have to worry about viruses, malware or security updates. The software will be offered under what's known as an open-source license that allows other programmers to modify its code.
Microsoft did not comment, but it is keenly aware of both the technology and business challenge it faces as more and more people rely on Web-based programs rather than PC-based software. Sales of its operating systems brought in $11.6 billion in revenue during the nine months ended March 31. And Microsoft itself was planning to unveil a new Web browser that, like Chrome, would also function as an operating system, at an event in August.
Google beat Microsoft to the punch.
"Google is trying to take Microsoft out at the knees," said Rob Enderle, an analyst with the Enderle Group who has consulted for Microsoft.
Analysts said a key part of Google's strategy is to persuade software developers to start writing applications that run in Web browsers, rather than customizing them for a specific operating system such as Windows. "All Web-based applications will automatically work" on the new operating system, Pichai and Upson wrote.
For example, computer games such as "The Sims" or "Grand Theft Auto" are currently designed to run on a PC or gaming console such as the PlayStation, and their programmers have to customize the code for each different device. Google wants developers to write their software based on Internet standards, so that the program can run in a Web browser on any PC, whether it uses Chrome or Windows or the Mac OS.
Microsoft's key advantage with Windows is its enormous user base, which has allowed the Redmond, Wash., software giant to reign supreme over the industry for two decades, analysts said. And, it could be its best weapon to blunt the attack of Google's Chrome operating system.
"It's a long road before this thing is delivered and then years before it has a possibility of putting a dent in Microsoft's installed base," said Michael Silver of Gartner.
Google says its advantage will be that applications written for Chrome will also run on browsers on Windows, Mac or Linux, "thereby giving developers the largest user base of any platform."
But Google's track record with new products is shaky. It so far has had mixed results getting manufacturers to adopt Android, for instance, an operating system designed to work across smaller devices such as mobile phones and set-top boxes.
It said it has discussed the Chrome operating system with major PC manufacturers and asked them for feedback, but none would acknowledge plans to make a Chrome-based PC.
"We are studying Chrome," Hewlett-Packard said in an e-mail statement. "HP wants to understand all the OS choices in the marketplace that may be used by its competitors, and remains open to considering various approaches to meet its own customer needs."
But Haff said that it doesn't necessarily matter to Google whether or not either its Android operating system or its Chrome operating system is widely used. As long as Google can get more people to embrace Web-based computing, Google wins. "The individual nuts and bolts of how that happens are far less important to Google than that it happens," he said.
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Explore further: Google's operating system escalates Microsoft duel (Update)