Google’s Plan To Launch A New Operating System: Which ETFs Would Benefit?

Google (GOOG) plans to launch a new operating system for personal computers, an attempt to challenge the dominance of Microsoft’s Windows system. The open-source operating system is based on Google’s internet browser, Chrome. The Google Chrome OS will initially be targeted at netbooks, the smaller, no-frills, low-cost version of the laptop, said Google in a posting Tuesday night. Google hopes to have netbooks powered by a similarly quick operating system by the middle of 2010. A new operating system from Google could challenge Microsoft’s dominance among PC users.

There are some questions to be asked about how well this operating system will be received by consumers. Ian Paul wrote on the PC World blog. “That’s a problem, in my view. Sure, Google Docs is a great application for typing up a basic document, but it is far from the powerful tool that Microsoft Word is. So while Google says this OS is ideal for netbooks, I don’t see why you would want to handicap yourself by using a less-functional OS on a piece of hardware, like a netbook, that has a nearly full-sized keyboard and a good processor.”

Google CEO Eric Schmidt and co-founder Sergey Brin are expected to discuss the new operating system later this week when they appear at a media conference hosted by Allen & Co. at the Sun Valley resort in Idaho.

As we are an ETF geared website, we looked to what ETFs might benefit from a shift in either direction.

If you like a middle of the road approach with exposure to both, (although a heavier weighting towards Microsoft) you might want to take a peek at the iShares Dow Jones U.S. Technology (IYW), with 11.09% weighting of MSFT and 6.02% of GOOG.

If you are looking to bet on Google’s success, try the First Trust Dow Jones Internet Index (FDN), which has 9.55% weighting of Google and no position in Microsoft.

Investors should be circumspect about Google, however. The Obama administration’s Justice Department has forewarned business that it will be aggressive in pursuing antitrust cases, and Google has attracted the attention of the Justice Department over a proposed deal with Yahoo and the Justice Department has launched an investigation into whether Google is violating antitrust laws by reaching an agreement with authors and publishers to digitize millions of printed books and post the contents online.

First Trust Dow Jones Internet Index (FDN) seeks to track the price and yield performance, before fees and expenses, of the Dow Jones Internet Composite index. The fund normally invests at least 90% of assets in stocks that comprise the index. The index is designed to include only companies whose primary focus is Internet-related. To be eligible for inclusion in the index a company must generate at least 50% of revenues from Internet commerce or services and must be currently included in the Dow Jones U.S. index. The fund is nondiversified.

iShares Dow Jones US Technology (IYW) seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Technology Index. The fund generally invests at least 90% of assets in securities of the underlying index and depositary receipts representing securities of the underlying index. It may invest the remainder of assets in securities not included in its underlying index but which BGFA believes will help the fund track underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. The fund is nondiversified.

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