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Google Trying To Diversify On Operating Systems

googleIt is a matter of public knowledge how envious is Google on Microsoft’s success with the X-Box game console. After all, Microsoft managed to diversify itself very successfully in the hardware sector via a single, yet very desirable product. Google’s forrayal into the hardware software has led to the creation of the Android mobile phone, which was not by any means a success (nor a failure, since it brought some profit to the company). Yet, Google has its own standards for the success – and anything below the number one position in a market seems to be unacceptable.

This is probably the reason why Gogle has embarked on a dangerous journey. Google is planning to attack the Microsoft corporation on its very core turf 0 the operating system market.

Google, which already offers a suite of e-mail, Web and other software products that compete with Microsoft, said on Tuesday it would launch a new operating system that will initially be targeted at netbooks.

Well, this is a big move.  Some might say that it was predictable, since Google has tried since its inception to replace the Microsoft products with web-based solutions (remember all the applications repalcing MS Office, the email software MS Outlook and whatever else Microsoft had?). Anyway, making an operating software looks like a big jump into the unknown, with high associated risks. If Google fails, its image would be inevitably tarnished and it will remain something like a shadow player in the software market. If it succeeds, well… we could see a re-invention of the software market as it looks today.

Called the Google Chrome Operating System, the new software will be in netbooks for consumers in the second half of 2010, Google said in a blog post, adding that it was working with multiple manufacturers.  Some analysts said that attacking Microsoft is in Google’s culture and it is inevitable they go for it, sooner or later.

What is interesting is that we at do not see so many financial/investing risks associated with the decision. Of course, Google must divert its workforce from maintaining its market leader search engine to creating a new type of software, which might be disruptive. But I guess that their operating search engine is quite stable and does not need large improvements in the near future, so the opportunity costs could be quite small. Even further, for such an product the failure costs are not so big if you can afford them – and the mountain of cash on which Google sits speaks for itself. The move can also be seen as a retalliation response from Google to Microsoft’s launch of its own improved search engine, Bing.

Reuters mentioned that key to success will be whether Google can lock in partnerships with PC makers, such as Hewlett-Packard Co and Dell Inc, which currently offer Windows on most of their product lines.

After the blog release, Google’s shares have slightly dropped today with 3% to $396 per share, which indicates that the buyers are waiting to see how successful is Google on securing its distribution agreements.

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