The new operating system will be based on Google's 9-month-old Web browser, Chrome. Google intends to rely on help from the community of open-source programmers to develop the Chrome operating system, which is expected to begin running computers in the second half of 2010.
The early versions of the Chrome operating system will be tailored for "netbooks," a breed of low-cost, less powerful laptop computers that are becoming increasingly popular among budget-conscious consumers primarily interested in surfing the Web.
That is a direct challenge to Microsoft, whose next operating system, Windows 7, is being geared for netbooks in addition to larger computers.
The vast majority of netbooks already run on Windows, and that is unlikely to change unless Google can demonstrate the Chrome operating system is a significant improvement, said Forrester Research analyst Paul Jackson. He pointed out that many customers had returned the original netbooks that used open-source alternatives to Windows.
"It was not what people expected," he said. "People wanted Windows because they knew how to use it and knew how applications worked."
In announcing its operating system in a blog posting late Tuesday night, the Mountain View, Calif.-based Google said it believes it can streamline the operating system to improve speed and reduce security threats.
"We hear a lot from our users, and their message is clear -- computers need to get better," wrote Sundar Pichai, Google's vice president of product management, and Linus Upson, Google's engineering director.
Google shares rose Wednesday $5.86, or 1.5 percent, to close at $402.49. Shares in Redmond, Wash.-based Microsoft inched up 3 cents to $22.56.