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(alleyinsider.com) --
Perhaps the most exciting tech battle to watch: Google's (GOOG) intensifying clash with fellow titan Microsoft (MSFT), as the two square off in almost every major line of business.
Click here to see 10 ways Google is trying to kill Microsoft →
The latest: In the last few months, each company has launched a direct attack on their arch rival's most important business. Most recently, Google announced that it was developing a desktop operating system, Chrome OS, and Microsoft launched a new search engine, Bing.
Google's success or failure with its operating system attack will be particularly interesting to watch, as it's Google's first attempt to disrupt Microsoft's most important business. Redmond has enjoyed many years (and billions of dollars) on top of the operating system market with DOS and Windows, and besides Apple, no one's been able to obtain share in the consumer market.
But Chrome OS -- starting with cheap, mobility-focused netbooks -- promises to be fast, simple, and -- important -- free to gadget makers, which are already facing paper-thin margins on netbooks, and pressure to cut costs. If Google can make a great user interface and link easily to cloud services like the Web, Google search, GMail, and Google chat, then the Windows juggernaut could be at risk.
Why does that matter? During Microsoft's last fiscal year, Windows contributed 25% of Microsoft's revenue and 53% of its operating profit.
Meanwhile, Microsoft is attacking Google's biggest business, search. Its most recent product launch, Bing, is a good product that's been just a modest success so far: Microsoft's share of the U.S. search market was 8.4% in June, up from 8.0% in May, according to comScore.
Perhaps more important: It looks like Microsoft is close to finally signing a search and advertising partnership with Yahoo. While that takes one of Google's enemies out of its sights, it means that its lone major rival will have more resources and motivation behind it.
Why does this matter to Microsoft? Because it's burned through billions of dollars over the last few years trying to be a big player on the Web, and it will have great hopes and expectations for its deal with Yahoo. And for Google, because search generates more than 90% of its revenue, and funds many of its unprofitable, maybe-Microsoft-killing projects, such as Google Apps, Chrome OS, and Android.
But those are just two of the many fronts in Google's war with Microsoft.