Google’s new Chrome operating system for netbooks is still a year away. But there is little doubt that it is already keeping Microsoft Chairman Bill Gates and CEO Steve Ballmer up at night.

Gates and Ballmer built a $60 billion business that was ignited by a deal to provide IBM with an operating system for the IBM PC based on a per-unit license rather than a onetime fee. The deal for an OS that Gates bought from a company called Seattle Computer Products also included an agreement that let Gates and Microsoft license the OS to PC makers other than IBM.

This, of couse, goes down as Gates’ greatest moment. It represented a financial windfall that was the seed of all of Microsoft’s PC power and profits.

What’s ironic about this new chapter in the soap opera that is the highly lucrative technology business is that Google CEO Eric Schmidt, formerly of Novell, is taking a page out of the Gates playbook to hammer his old nemesis.

Gates and Ballmer, by the way, left Schmidt’s old company bloodied and beaten in the network wars. Remember, Novell was the leader in the network operating system market. And Gates and Ballmer used their business and technology savvy to leave Novell as an afterthought in the network OS world.

Now, Schmidt and Google are using the same tactic that allowed Microsoft to make a comeback in the browser wars in the early days of the Internet—offering Internet Explorer for FREE. That’s right, free is a great strategy when you have cash to burn and the product is not your primary cash cow. Free killed Netscape.

A free operating system is just what Google is planning to bring to netbook makers with its Chrome OS.  Google has, in fact, said it will offer the system free under an open-source license.

For Microsoft, whose operating systems business is already smarting from a PC market meltdown, this represents a financial migraine the likes of which  it has never before experienced.

The Wall Street Journal reported earlier this year that Microsoft makes just $15 per netbook with Windows XP Home, compared to between $50 and $60 for PCs running Windows Vista. Take the netbook phenomenon, which is transforming the market and putting a huge dent in the desktop PC market, and then add up the operating system financial hit Microsoft is likely to take.

Believe me, Gates and Ballmer are swapping e-mails right now on how they are going to take the shine off Chrome with a public-relations blitz. And watch, Microsoft will spend more money battling Chrome before it ever gets off the starting line than it will getting the channel locked and loaded with Windows Azure, its forthcoming cloud computing platform.

The sad thing about the operating system firefight between Google and Microsoft is that both these companies will spend mountains of money wining and dining the top netbook makers but will do little to influence solution providers and system builders. Those partners who are able to private-label netbooks and then support customers using them for business and play are the wild card in the operating system wars. Sadly, they are often looked at as a pawn rather than a strategic piece on the chessboard, even though they represent the majority of the PC market.

Google and Microsoft will likely fight the war without giving much thought to the channel. That may be the biggest and most foolhardy mistake they will make as they battle for netbook OS supremacy.