By Bob Blandeburgo
Google Inc. (Nasdaq: GOOG), not satisfied owning the search engine market, yesterday (Wednesday) revealed it is going to assault Microsoft Corp. (Nasdaq: MSFT) on the turf it has dominated for two decades: the operating system (OS).
In a blog posting, the Mountain View, Calif.-based company introduced the Google Chrome Operating System, which shares the same name as the web browser it introduced in September. Google expects the OS to be available in the second half of 2010, and it initially will run on netbooks, or low-cost laptops designed for Internet access. The company is working with multiple manufacturers such as Acer Inc., Hewlett-Packard Co. (NYSE: HPQ) and Toshiba Corp. to bring Chrome OS-backed netbooks to the market, Google said.
No. 1 computer seller H-P told the Dow Jones Newswires that it is "studying" the Chrome OS.
"," said H-P spokeswoman Marlene Somsak.
Dell Inc. (Nasdaq: DELL) is also giving consideration to Chrome OS.
Analysts were mixed on the news.
"There is a possibility that the new OS can break the paradigm Microsoft and Intel created over the past 20 years," aid Yukihiko Shimada, a computer analyst at Mitsubishi UFJ Securities Co. told Bloomberg News. "There is plenty of business opportunity for Google in this market."
However, FBR Capital Markets Corp. (Nasdaq: FCBM) analyst David Hilal said Google could capture some share on the netbook front, but could find it tough to get beyond that.
"I really don't picture Google going upstream to laptop or PC market," he said in an interview with MarketWatch.com. "They may try, but that is a much tougher row to hoe."
Comparing the Chrome OS to its Chrome web browser, Google said it is "going back to the basics and completely redesigning the underlying security architecture of the OS so that users don't have to deal with viruses, malware and security updates. It should just work."
The move represents a natural progression for Google, which for years has been experimenting in applications beyond its search. Its most successful experiment is undoubtedly Gmail, which earlier this week left its beta phase after five years. Since Gmail's inception, the company produced Google Apps, which gives users a central location for calendar, word processing and spreadsheet applications-all of which are compatible with Microsoft Office applications.
Google Apps, a prime example of cloud computing, allows for a more consistent collaboration between users: Instead of emailing attachments, the document will be on a central server where anyone with permission can access edit it within the web browser from any computer.
Chrome OS will utilize the same "cloud" that Google Apps is using. For app developers, "the web is the platform," Google said. This will give Chrome OS a competitive advantage over the top three operating systems on the market right now (Windows, MacOS and Linux) because any app that runs in the Chrome OS will also run on the others.
"We hear a lot from our users and their message is clear-computers need to get better," Google said. Whether Google can make an impact on the quality of computers is an entirely different issue. It faces a steep uphill battle against not only Microsoft, but also Apple Inc. (Nasdaq: AAPL), which is slowly eroding Microsoft's commanding lead in the OS market.
Last November, Microsoft's Windows OS market share dropped to 89.6% according to market research firm Net Applications. That marked the first time the OS held less than a 90% share of the market. In May, that share was down to 87.8%, while Apple's MacOS was up to 9.8% from November's 8.9%.
The news of a Google OS could ice its relationship with Apple, where Google Chief Executive Officer Eric Schmidt has a seat on the board of directors. The two companies have already been competing on the mobile phone front with Google's Android OS competing with Apple's iPhone.
In November 2007, when Google announced it would develop the OS for a line of T-Mobile USA Inc. phones, some analysts were surprised that Schmidt would remain on the board of operations at both companies.
In May, The New York Times reported the Federal Trade Commission launched an inquiry into the close ties of the two boards. And now with the Chrome OS news, respected tech site CNET is calling for Schmidt to step down from Apple's board.
When Chrome OS is released, it will mark the third major front in its war with Microsoft. The other two are cloud applications and search.
Microsoft is attempting to chip away at Google's ubiquitous search engine with its newly launched Bing search engine. To a lesser extent, Google competes with Microsoft with its Chrome web browser (which has 1.8% of the market share in May versus Microsoft Internet Explorer's 65.5%) and on the mobile phone front, pitting its Android OS against Windows Mobile.
Chrome OS, an open source project that will have its code readily available for anyone to see-will be free, Google spokesman Eitan Bencuya told Money Morning in an e-mail. This strategy removes an important barrier for many and will likely serve as a funnel to Google's other products and lucrative ads.
Microsoft is set to debut its latest version of Windows, Windows 7 on October 22. Market research firm International Data Corp. (NYSE: IDC) expects Windows 7 to become the dominant OS by 2012.
Shares of Google were boosted 1.48% by the news yesterday, closing at $402.49, up $5.86.
News and Related Story Links:
The Official Google Blog:
Introducing the Google Chrome OS
The Wall Street Journal:
Google to Challenge Microsoft with Operating System
Google to Unveil Operating System to Rival Microsoft
Operating System Market Share
Mr. Schmidt, Step Down from that Board
Microsoft/Google Competition Heats Up
Hot Stocks: Microsoft's Windows 7 Will Win Big Despite a Slow Start