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Google’s new Chrome Operating System (OS) represents a direct challenge to Microsoft’s hegemony in the burgeoning market for netbook software, according to iSuppli. Google’s Chrome OS will launch in the second half of 2010 and will initially target netbook PCs. However, the OS will not only run on netbooks based on Intel’s X86 architecture microprocessors, but also those using ARM-based chips, clearly showing the operating system is targeted at very low-cost netbooks.

iSuppli predicts shipments of wirelessly-enabled netbooks will more than triple by 2012, rising to 36.3 million units, up from 10.3 million in 2008. The wirelessly-enabled category represents the majority – but not all – of the total netbook market, consisting of devices that support Wireless Local Area Networking (WLAN), 3G WLAN and Wireless Metropolitan Area Network (WMAN) connectivity.

Google versus Goliath

The announcement of Chrome sets the stage for battle royale between Google and Microsoft.

“Google’s launch of the Chrome Web browser served as a preliminary bout in the company’s battle with Microsoft, taking on the market leading OS, Internet Explorer,” said Matthew Wilkins, principal analyst, compute platforms research, for iSuppli. “However, with the PC OS version of Chrome, Google is ringing the bell for the main event.

“The arrival of the Chrome OS is a direct threat to one of Microsoft’s main revenue streams: sales of the Windows operating system for netbook PCs. It also comes at a time when Microsoft is on the eve of launching its most promising operating systems in a number of years: Windows 7.”

Linux’s challenge

Currently, Windows is the dominant operating system on netbooks, with Linux running a distant second. The Chrome OS is based on Linux, running a windowing interface on top of the Linux kernel.

“The small penetration of Linux in netbooks is not due to any technical shortcomings,” Wilkins said. “Rather, the OS has suffered from the fact that there is not one Linux brand name that is capable of taking on the strength of the Microsoft trademark in the PC market. Because the vast majority of people who buy netbooks are consumers, who do not have a high degree of knowledge of the key players in the OS market, they are going with the names that they know. And in PCs, that name is Microsoft.

“For Google to be successful, it needs to promote and position its brand so that non-tech-savvy consumers will be comfortable buying a netbook running its operating system rather than one from Microsoft. This will be a major challenge.”

Google must counter the high visibility of the Microsoft brand name on countless products in retail outlets, ranging from software, to PCs, to peripherals. In contrast, in retail outlets, Google’s name appears only on mobile phones that run the company’s Android operating system.

To succeed, Google must establish OEM deals that place its Chrome OS name on the netbooks as they ship from OEMs’ factories.

“If this does not happen with sufficient critical mass, then the OS will be left at the mercy of digital distribution, requiring that users download and install some client software on their own,” Wilkins said. “This is a procedure at considerable odds with the basic PC knowledge of the typical netbook user.”

Google’s Chrome OS: A boon for wireless operators?

A key aspect of Chrome, and a major differentiator from Google’s Android, is that it runs in the “cloud,” meaning it’s essentially a Web-based OS, rather than one that entirely resides in the actual device’s hardware. This feature also distinguishes Chrome from the new wave of other mobile operating systems.

“The Chrome OS stimulates data traffic usage on mobile devices such as netbooks and Mobile Internet Devices (MIDs) by encouraging users to access applications running on the cloud,” said Jagdish Rebello, senior director and principal analyst at iSuppli. “Because of this, Google’s Chrome OS has the potential to drive increased data usage on netbooks and notebooks in a way that allows operators to monetize this data traffic.

“Revenue from broadband access will be a very important component of the data revenue of total revenues of wireless carriers worldwide. iSuppli projects that global revenue from mobile broadband access will grow to more than $180 billion in 2013, up from $61 billion in 2008.”

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