Google's new operating system to take on Microsoft

SUN VALLEY, Idaho — Google Inc. is working on a new operating system for inexpensive computers in a daring attempt to wrest away Microsoft Corp.'s long-running control over people's computing experience.

The new operating system, announced late Tuesday night on Google's Web site, will be based on the company's nine-month-old Web browser, Chrome. Google intends to rely on help from the community of open-source programmers to develop the Chrome operating system, which is expected to begin running computers in the second half of 2010.

The Mountain View, Calif.-based company disclosed its plans for the operating system shortly after an online technology news service, Ars Technica, and The New York Times telegraphed the news on their Web sites.

Shares of Google jumped $3.21 to $399.84 in premarket trading Wednesday, while Microsoft fell 18 cents to $22.35.

Google is designing the operating system primarily for "netbooks," a lower-cost, less powerful breed of laptop computers that is becoming increasingly popular among budget-conscious consumers primarily interested in surfing the Web.

The operating system represents Google's boldest challenge yet to its biggest nemesis — Microsoft.

A high-stakes duel between the two technology powerhouses has been steadily escalating in recent years as Google's dominance of the Internet's lucrative search market has given it the means to threaten Microsoft in ways that few other companies can.

Google already has rankled Microsoft by luring away some of its top employees and developing an online suite of computer programs that provide an alternative to Microsoft's top-selling word processing, spreadsheet and calendar applications.

Meanwhile, Microsoft has been trying to thwart Google by investing billions of dollars to improve its own Internet search and advertising systems — to little avail so far. In the past month or so, though, Microsoft has been winning positive reviews and picking up more users with the latest upgrade to its search engine, now called "Bing." Microsoft is hailing the makeover with a $100 million marketing campaign.

Now Google is aiming for Microsoft's financial jugular with Chrome its operating system.

Microsoft has drawn much of its power — and profits — from the Windows operating system that has steered most personal computers for the past two decades.

Google's chief executive, Eric Schmidt, and its co-founders, Larry Page and Sergey Brin, have made little attempt to conceal their disdain for Windows in recent years.