Google blogged  in a recent post that their system will be designed at first for low-cost laptops called netbooks. The company is in talks with partners on the project and computers running the software will be available in the second half of 2010.

Google already has a strong rivalry with Microsoft, which includes Web search, browsers and business applications such as word processing and spreadsheets. Windows, Microsoft’s flagship product, runs about 90 percent of the world’s personal computers. Google is also trying to spur Web-ad sales after reporting its first sequential revenue drop as a public company.

“There is a possibility that the new OS can break the paradigm Microsoft and Intel created over the past 20 years,” said Yukihiko Shimada, a computer analyst at Mitsubishi UFJ Securities Co. in Tokyo. “There is plenty of business opportunity for Google in this market.”

Google said it’s working with computer makers to introduce a number of netbooks next year, without identifying any of the companies. The Chrome OS will be open-source, meaning the program code will be open to developers, Google said. The software will work on top of the Linux operating system.

Read the full story at Bloomberg.