“We dont have numbers, we know it will be millions,” Schmidt said in an interview yesterday with Bloomberg Television. “Its certainly possible” the software will gain share from Microsoft, he said. “Its certainly also possible that Microsoft will change its strategy to address that.”
Google, grappling with a slowdown in online advertising, aims to drive more users to its sites including the search engine, the worlds most popular. The operating system will be free and is slated to be installed first on small laptops, called netbooks, next year.
“We make money as people adopt the Internet and broadband and use these new powerful operating systems,” Schmidt said during the interview in Sun Valley, Idaho, at the Allen & Co. media conference. “We know that they eventually do more searches and click on more ads.”
Getting into operating systems and attracting users wont be an easy task for Mountain View, California-based Google, said Sameet Sinha, an analyst at JMP Securities LLC in San Francisco. Microsoft commands more than 90 percent of the market.
“An operating system is a pretty difficult thing,” Sinha said. “We know this because there arent too many people who make operating systems.”
Frank Shaw, a spokesman for Redmond, Washington-based Microsoft, declined to comment.
YouTube Optimism
Google is looking to diversify beyond Internet-search ads, which account for more than 90 percent of sales. The company reported its first sequential decline in revenue since going public in 2004 during the first quarter.
YouTube, which has been a money-loser for Google, may start helping its parents bottom line, Schmidt said. Google acquired the top U.S. video-sharing site in 2006 for $1.65 billion.
“Im much more optimistic about YouTube crossing profitability than I was, say, a year earlier,” Schmidt said. “Weve done a good job of managing YouTubes costs, and revenue is now growing fairly nicely.”
He said display ads, those that show pictures and videos, may be the next big source of revenue. Last year, Google bought display-ad company DoubleClick for $3.2 billion, its largest acquisition.
Google may make more acquisitions, Schmidt said. “I suspect they wont be large ones because of the costs and investing involved, unless some amazing opportunity comes along.”
New Normal
Schmidt also said the worst of the financial crisis is now past, though the business world will operate under new rules.
“The reality of the new normal is sinking in,” he said at a news conference earlier yesterday. “You run your inventories tight. Credit is not readily available. CEOs have adapted.”
Google gained $7.90, or 2 percent, to $410.39 yesterday in Nasdaq Stock Market trading. The shares have gained 33 percent this year.
Schmidt said Microsofts new Bing Internet search engine may lure more Web surfers in the future.
While Google isnt losing many users to Bing, Microsofts product shows that the search market is competitive, he said.