July 10 (Bloomberg) -- Google Inc.’s planned Chrome operating system will be on millions of personal computers and may eventually lure users away from Microsoft Corp.’s Windows, Google Chief Executive Officer Eric Schmidt said.

“We don’t have numbers, we know it will be millions,” Schmidt said in an interview yesterday with Bloomberg Television. “It’s certainly possible” the software will gain share from Microsoft, he said. “It’s 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 world’s 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 won’t 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 aren’t 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 parent’s bottom line, Schmidt said. Google acquired the top U.S. video-sharing site in 2006 for $1.65 billion.

“I’m much more optimistic about YouTube crossing profitability than I was, say, a year earlier,” Schmidt said. “We’ve done a good job of managing YouTube’s 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.

“It’s probably our next billion-dollar business,” Schmidt said. “We’re not a huge player in that space today.”

Google may make more acquisitions, Schmidt said. “I suspect they won’t 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 climbed $4.01 to $414.40 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have advanced 35 percent this year.

Schmidt said Microsoft’s new Bing Internet search engine may lure more Web surfers in the future.

While Google isn’t losing many users to Bing, Microsoft’s product shows that the search market is competitive, he said.

Microsoft unveiled Bing on May 28 and released it the following week, bolstered by a TV and Web ad campaign. The company increased its share of the U.S. Web-search market to 12.1 percent in the week ended June 12 from 8 percent in May, according to researcher ComScore Inc. in Reston, Virginia. Google had a 65 percent share in May, followed by 20 percent for Yahoo! Inc.

Schmidt, who serves on Apple Inc.’s board, said he was kept apprised of CEO Steve Jobs’s health. Jobs, 54, got a liver transplant earlier this year.

Apple spokesman Steve Dowling declined to comment.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Greg Miles in New York at gmiles1@bloomberg.net

Last Updated: July 10, 2009 16:30 EDT