Google's PC gamble will take years to play out

By Jim Finkle - Analysis

BOSTON (Reuters) - Google Inc's (GOOG.O) plan for a new PC operating system, its most ambitious assault against Microsoft Corp (MSFT.O), 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 on 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.

Google has not discussed pricing for its Chrome Operating System, which will initially be sold on the low-cost netbooks designed for Internet surfing and running Web-based software starting in the second half of 2010.

If Google chooses to give away the software, as it does some programs, that would pressure Microsoft to cut prices on Windows, eroding earnings from the profitable system found on nine 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 Centre 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.