Implications of Google’s PC Operating System

Mountain View, California-based Google Corporation (GOOG), best known for its white page search engine and recently its Chrome web browser, announced on Tuesday (07-08-09) that it is working on a PC operating system called ChromeOS. Google is currently aiming the OS at the relatively new netbook segment that is served mostly by Microsoft’s (MSFT) Windows operating system at the moment. However, Google has expectations the ChromeOS will eventually make its way onto other computer systems such as laptops and desktops. Initial reactions to this announcement have varied greatly, and considering Google hasn’t released much information about the new operating system, or how it intends to market it, much of what is said is speculation.

Google is known for pushing cloud-based services such as Google Apps, Google Earth/Maps, and created Chrome web browser to provide what it calls a better and more unified web experience for its web apps. Many see the new ChromeOS as an expansion of this content delivery model, and that ChromeOS will be a mostly cloud-based operating system. The idea of such an OS isn’t new and is driven by the idea that more and more individuals at home use their computers mostly for web-based services such as email, social networking, and web surfing. The theory is, the more software companies begin offering web applications online, the less need there is for locally installed applications. Being that netbooks are targeted at people who mostly need only web services, ChromeOS seems to be a great fit.

Though the model seems a perfect match, Microsoft Corporation is a force to be reckoned with in the operating system market, given that its Windows OS has dominated personal computers for over two decades. Best known for Microsoft Windows, Microsoft Office and Internet Explorer, Microsoft has been developing operating systems, web browsers, and office suites since before Google thought about creating a search engine. This gives the company a huge lead in industry recognition and market share, but recently, Google’s Chrome browser has been eating into some of that market share, and with millions of people using their search engine, Google is now a household name.

If Google markets ChromeOS wisely, it could be well on its way to becoming a strong player in the OS market. If it sticks with the cloud-based OS model, it will surely dominate the netbook segment early on. However, it will need to offer a traditional OS offering for laptops and desktops to remain viable in those segments. Google has hinted that the OS won’t be ready to introduce (at least in beta form) for 12 to 18 months, so until then, Microsoft remains the clear leader in netbooks for now. Either way, both companies are financially strong and have strong brand recognition. One thing is for sure, if Goggle’s ChromeOS turns out to be a solid product, Microsoft will no longer be the only big show in town.

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While Google and Microsoft duke it out in the Internet/PC world, investors could use the opportunity to generate income on the behemoth companies with stock options. A stock options strategy known as the covered call investing strategy involves investors selling call options against a purchased or already owned stock. Covered call investing positions are available for Google and Microsoft for August expiration with potential returns in the neighborhood of 4.5%, that’s a 4.5% potential return in only about one month (39 days).

Investors can also use stock options to protect their positions. For example, an investor who did not want to sell their positions in Google or Microsoft, for example for tax implications, but suspected their stock would drop in price in the future could purchase put options to protect their stock. A put option operates just like insurance, if a stock drops in price, the put options acts like insurance to cover the loss.

It’s also possible to combine a protective put option strategy and an income generating strategy to generate monthly income, yet be protected from downward stock movements.

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[tags] Mountain View, California, PC, operating system, ChromeOS, OS, netbook, cloud-based, Google Earth, Chrome web browser, Microsoft Windows, Microsoft Office, Internet Explorer, tax implications, GOOG, Google Inc., MSFT, Microsoft Corp. [/tags]