Microsoft's future riding on Windows 8

By Michael Liedtke

Associated Press

Published: Tuesday, Feb. 28 2012 10:15 a.m. MST

FILE - In this Sept. 13, 2011 file photo, Steven Sinofsky, president of Windows and Windows Live, gives the keynote address and a preview of Windows 8 at the Microsoft Build Windows conference at the Anaheim Convention Center in Anaheim, Calif. A test, or “beta”, version of the revamped operating system will be unveiled Wednesday, Feb. 29, 2012, in Barcelona, nudging it a step closer to its anticipated release next fall.

The Orange County Register, Mark Rightmire, File) MAGD OUT; LOS ANGELES TIMES OUT, Associated Press

Enlarge photo»

SAN FRANCISCO — Microsoft is scrambling to preserve what's left of its kingdom.

Since the company released its Windows operating system in 1985, most of the sequels have been variations on the same theme. Not that it mattered much. Regardless of the software's quality, Microsoft managed to remain at the center of the personal computing universe.

The stakes are much different as Microsoft Corp. puts the finishing touches on Windows 8 — perhaps the most important piece of software the Redmond, Wash. company has designed since co-founder Bill Gates won the contract to build the first operating system for IBM Corp.'s personal computer in the early 1980s.

A test, or "beta", version of the revamped operating system will be unveiled Wednesday in Barcelona, nudging Windows 8 a step closer to its anticipated mass market release in September or October. The company will offer the most extensive look at Windows 8's progress since it released an early version of the system to developers five months ago.

Microsoft designed Windows 8 to help it perform a difficult balancing act. The company hopes to keep milking revenue from a PC market that appears to be past its prime, while trying to gain a stronger foothold in the more fertile field of mobile devices. It's a booming market that, so far, has been defined and dominated by Apple Inc.'s trend-setting iPhone and iPad, and Google Inc.'s ubiquitous Android software.

"Microsoft's future path is riding on Windows 8 and its success," said Gartner Inc. analyst David Cearley. "This is a chance for Microsoft to re-establish itself in a market where it's becoming increasingly irrelevant."

If Windows 8 is a hit, it could also help lift the fortunes of struggling PC makers, including Hewlett-Packard Co. and Dell Inc. Besides giving businesses and consumers a reason to consider new PC purchases, Windows 8 is expected to spawn a new breed of hybrid machines that will be part computer tablet, part laptop computer.

If Windows 8 is a flop, however, it will increase the pressure on Microsoft CEO Steve Ballmer. His 12-year reign has been marred by the company's troubles adapting to an Internet-driven upheaval. As Microsoft has stumbled, faster-innovating companies such as Apple and Google have elbowed their way into a position to steer the direction of computing for the next decade or two.

Ballmer, known for his zealous faith in Microsoft, hails Windows 8 as the catalyst for an exciting — and lucrative — new era at the 37-year-old software maker.

Investors seem to be believers, too. Microsoft's stock has recently been trading its highest levels since April 2008, closing at $31.35 on Monday. The stock has gained about 21 percent so far this year. By comparison, Apple's stock has surged 30 percent during the same period, while Google's shares have dropped 6 percent.

Microsoft's financial performance traditionally improves when it releases a new version of Windows. The last upgrade came in October 2009 when Windows 7 hit the market. The company has sold more than 525 million copies of Windows 7 since then. Part of Window 7's success stemmed from pent-up demand; the previous version, Vista, was so clunky and buggy that many PC users stuck with the system they already had on their machines or switched to Apple's technology on Mac computers.

Windows 8 is radically different from its predecessors. The system won't even have Microsoft's familiar "Start" menu. All applications are spread across a mosaic of tiles, as part of a design Microsoft calls "Metro." The tiles, which resemble road signs, can be navigated with a swipe of the finger on the display screen or with a keyboard and a computer mouse. The tiles also provide a glimpse at the activity occurring in applications connected to the Web, such as email.

The system also is expected to enable users to easily back up their pictures, movies, music and other files on a Microsoft storage service called SkyDrive, which will compete against Apple's iCloud.

The operating system's versatility means it can be used to power computer tablets, as well as traditional PCs.

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