Google is to launch a new operating system, in its most direct challenge yet to the dominance of Microsoft.

Google Chrome OS will be a development of its Chrome web browser. The search giant initially aims to install the new system on small, low-cost computers known as netbooks, which are currently outselling more powerful personal computers. Google said that it believed the software would eventually be used on PCs as well.

The move is likely to intensify the rivalry between Google and Microsoft, whose Windows operating system is used on the majority of the world’s personal computers. Operating systems help to run and control the basic functions of a computer.

Google said that the project was a natural extension of its Chrome browser and was necessary because older operating systems were designed at a time when the internet did not exist.

“Speed, simplicity and security are the key aspects of Google Chrome OS,” said Sundar Pichai, a Google Vice President, and Linus Upson, engineering director, in a blog post. “We're designing the OS to be fast and lightweight, to start up and get you on to the web in a few seconds.”

The news spread quickly on the blogosphere, with many commentators applauding the move. The influential TechCrunch blog said it was a “genius play”, arguing that Microsoft’s XP software on netbooks was eight years old, making it a good target.

“Let’s be clear on what this really is,” MG Seigler, a TechCrunch writer, said. “This is Google dropping the mother of bombs on its chief rival, Microsoft.”

Stephen Shankland, of the technology site CNET, said that Google’s move had widespread implications.

“One is that it shows just how serious Google is about making the web into a foundation, not just for static pages but for active applications, notably its own such as Google Docs and Gmail.

“It opens new competition with Microsoft and, potentially, a new reason for anti-trust regulators to pay close attention to Google’s moves."

Google said that the new software would be released later this year on an open source licence, meaning that computer developers and programmers across the world will have the chance to use, modify and improve it. Netbooks running the finished product will go on sale in the second half of next year.

The company claimed that Chrome OS would change the focus of operating systems from controlling desktop PCs to a system designed to run the internet as fast as possible.

“The user interface is minimal to stay out of your way and most of the user experience takes place on the web,” Mr Pinchai and Mr Upson said.

Google has a big task on its hands. Many companies and products have tried to take on Microsoft’s Windows and failed. Although rival systems such as Linux and Apple's OS X are widely acclaimed, some analysts estimate that Windows and other Microsoft products are used on more than 90 per cent of computers. Microsoft is to release an updated version of its own operating system, Windows 7, in October.

Google has repeatedly trampled on Microsoft’s territory recently. First, it launched Google Chrome, a web browser, in competition with Microsoft’s Internet Explorer. It has also recently released Android, an operating system for mobile phones, a direct challenger to Microsoft’s Windows Mobile, which is used on the majority of smartphones.

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