by Taylor Huffman

Created on: July 10, 2009   Last Updated: July 14, 2009

Google (NSDQ: GOOG) has announced it will branch out into new territory - potentially treading on the toes of Microsoft's most ubiquitous software product - by developing an open-source operating system based on its recently released web browser, Chrome. The creation of this new operating system will largely rely on help from open-source programmers, which Google hopes will give rise to a user-friendly, fast and efficient operating system with greater appeal than the Windows systems most consumers are familiar with.

Google expects to run Chrome OS on consumer computers by the second half of 2010. Early versions will be tailored for Netbooks, the low-cost devices used primarily for surfing the web that have increased dramatically in popularity among budget-conscious buyers. What seems most appealing in the early stages of its development is the fact that Chrome OS will be given to consumers for free. By offering an attractive free product that is intertwined with the rest of Google's services, Google creates for itself the opportunity to drive much higher traffic through its various applications and features, creating both higher quantity and quality of the ad space that generates a large portion of its profit.

This seems to be a direct attack on territory long considered to be dominated by Microsoft (NSDQ: MSFT). Its operating systems provide the brain power for roughly 90% of computers, and Microsoft's brand new system - Windows 7 - is set to be released on October 22nd, 2009. This is not, however, the first chapter of their feud. Google CEO Eric Schmidt has never kept quiet about his disdain for Microsoft, often citing his belief that Microsoft rigs its software to limit consumer choice in products outside of Microsoft's repertoire. Recently, Microsoft has spent billions investing in improving its own search capabilities. Bing, which has garnered very positive reviews, has yet to show substantial results in directing search traffic away from Google. Now, with the announcement of Chrome's development, Google has gone straight for the throat, aiming right at Microsoft's golden goose.

Though Google commands a large following, Microsoft will not be so easy to topple. It has already faced challenges to its operating systems from Apple and from Linux based systems that implement a similar open source software philosophy as Google. Each time, due to its familiarity, Microsoft has come out on top. And, with most PC manufacturers loyal to Microsoft, Google will have to come out with an almost evangelical strategy of conversion in order to see success. The average computer buyer receives a Microsoft OS with the purchase of his device and never thinks twice about it, so it seems Google will have to gain some manufacturer loyalty themselves if they intend to reach a large audience.

Even so, Google certainly has a chance. For instance, Google released via blog the information that the main intent of developing Chrome is to improve speed and reduce security threats - and reducing threats is an issue that has long plagued Microsoft. Investors seemed to side with Google on the matter, raising shares 1.7% as Microsoft's fell just over 1%. It seems as if the victor will ultimately determine the viability of open-source operating software in the average consumer's society.

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