ANALYSIS-Netbooks: Google's ace in PC war with Microsoft

* Chrome PC operating system could attract netbook makers

* PC brands could look to Chrome to improve netbook margins

* Google's strong web presence could help it grow netbooks

* Google names Acer, Asustek, Lenovo and HP among partners

By Kelvin Soh

TAIPEI, July 9 (Reuters) - Low-cost netbooks could provide the fertile ground Google Inc (GOOG.O) needs to make its free PC operating system a success as it prepares to take on Microsoft Corp's (MSFT.O) dominant Windows juggernaut.

Google's new Chrome Linux-based operating system will be free-of-charge, in stark contrast to Windows, which analysts say costs anywhere from $20 for the older XP system to at least $150 for the current Vista system.

That price gap could be just what Google needs to attract price-conscious consumers of netbooks, the bare-bones PCs which sell for as little as $400 each. The Internet search giant has said Chrome will initially be targeted at netbooks.

"Google's move is very timely because of all the bad press that Microsoft's been getting over its pricing for Windows 7," said Gartner analyst Lilian Tay.

"Microsoft is unwilling to cut prices, and PC brands are probably already unhappy with that because they're already trying so hard to make the extra dollar from the cheap netbooks."

The PC industry is struggling to recover from its worst downturn, hit by the global recession and as booming netbook sales cannibalise traditional laptops that cost as much as six times more.

A coming generation of "nettops", being promoted as the netbook equivalent of traditional desktop computers, could strain the industry further.

Chrome could be just the ticket for netbook makers to boost their profit margins, as the Web-centric nature of netbooks makes it a natural fit for Google, which has carved out a space for itself as a major innovator on the Internet.

Most major PC brands declined to say if they would make Chrome-based netbooks, although Google has named big tech names such as Hewlett-Packard (HPQ.N), Acer (2353.TW) and Lenovo (0992.HK) as partners.

Taiwan's Asustek (2357.TW), which pioneered the netbook in 2006, called the Chrome operating system an interesting development.