San Francisco: July 8, 2009 - In a direct challenge to Microsoft, Google announced late Tuesday that it is developing an operating system for PCs that is tied to its Chrome Web browser.

The software, called the Google Chrome Operating System, is initially intended for use in the tiny, low-cost portable computers known as netbooks, which have been selling quickly even as demand for other PCs has plummeted. Google said it believed the software would also be able to power full-size PCs.

The move is likely to sharpen the already intense competition between Google and Microsoft, whose Windows operating system controls the basic functions of the vast majority of personal computers.

“Speed, simplicity and security are the key aspects of Google Chrome OS,” said Sundar Pichai, vice president of product management, and Linus Upson, engineering director, in a post on a company blog. “We’re designing the OS to be fast and lightweight, to start up and get you onto the Web in a few seconds.”

Mr. Pichai and Mr. Upson said that the software would be released online later this year under an open-source license, which would allow outside programmers to modify it. Netbooks running the software will go on sale in the second half of 2010.

The company likely saw netbooks as a unique opportunity to challenge Microsoft, said Larry Augustin, a prominent Silicon Valley investor who serves on the board of a number of open-source software companies.

“Market changes happen at points of discontinuity,” Mr. Augustin said. “And that’s what you have with netbooks and a market that has moved to mobile devices.”

But while Google has deep pockets and a vast reach, it is in for a difficult battle when it comes to challenging Microsoft in the operating system market. Many companies have tried this over the years, with little success.

Google’s plans for the new operating system fit its Internet-centric vision of computing. Google believes that software delivered over the Web will play an increasingly central role, replacing software programs that run on the desktop. In that world, applications run directly inside an Internet browser, rather than atop an operating system, the standard software that controls most of the operations of a PC.  More