Google's PC gamble will take years to play out

By Jim Finkle - Analysis

BOSTON (Reuters) - Google Inc's plan for a new PC operating system is its most ambitious assault against Microsoft Corp, but it is a gamble that may not pay off for several years.

The rivals have spent years attacking each other, with Google claiming a clear victory for its search engine but not making much of a dent in Microsoft's Internet browser and Office programs.

Google announced on Tuesday it is developing a new operating system for personal computers, a month after Microsoft launched Bing, its first search engine to gain ground on Google after more than a decade of misses, according to early data.

The Chrome Operating System will initially be available on low-cost netbooks designed for Internet surfing and running Web-based software, starting in the second half of 2010.

Google said on Wednesday it will not charge for the software, which could pressure Microsoft to cut prices on its Windows, eroding earnings from the profitable system found on nine out of every 10 PCs.

"On a scale of one to 10, I'd say the threat to Microsoft is a three," said Howard Anderson, a lecturer at the MIT Entrepreneurship Center and former CEO of the Yankee Group.

He estimated that about 2 percent of PC users will try Chrome OS in the first year. If the software gets good reviews from early adopters, Chrome's market share could swell to 10 percent by the end of the second year, he said.

"While people love to bitch about Windows, the user community is used to it," Anderson said.

One major challenge that could delay adoption is getting makers of printers, networking gear, cameras and other devices to develop software that lets their equipment work with the new Google system. There are more than 2 million software drivers that connect devices to Windows PCs.

Google also needs to resolves bugs that will inevitably turn up, as well as arrange technical support for customers.

"Who will support it? It's a big ambition," said Jefferies & Co analyst Katherine Egbert.

Google said it is working with large technology companies on the project, including PC makers Acer, Asustek, Hewlett-Packard and Lenovo, and chipmakers Qualcomm and Texas Instruments.

The new operating system is based on a product from Google that has had limited success: the Chrome browser. As of February, it claimed 1.2 percent market share, compared to nearly 70 percent for Microsoft's browser, according to researcher Net Applications.

Google said Chrome OS will be fast and lightweight, letting users access the Web just a few seconds after turning on their PCs. But it did not provide much information about the product, making it hard for analysts to judge long-term prospects.

"There is a lot of spade work to be done before this is a viable alternative to Windows," said Roger Kay, an analyst with Endpoint Technologies.