* Windows 8, Surface tablet on sale at midnight

* CEO Ballmer sees Windows 8 recasting PC industry

* Windows 7 has sold 670 mln licenses-exec

By Nicola Leske

NEW YORK, Oct 25 (Reuters) - Microsoft Corp launched its new Windows 8 operating system and Surface tablet on Thursday in a bid to revive interest in its flagship product and regain ground lost to Apple Inc and Google Inc in mobile computing.

"We've reimagined Windows and we've reimagined the whole PC industry," Microsoft Chief Executive Steve Ballmer told Reuters Television early Thursday ahead of the launch.

Windows 8 devices and the company's new Surface tablet, which aims to challenge Apple's popular iPad head on, go on sale at midnight on Thursday.

Steven Sinofsky, head of Microsoft's Windows unit and the driving force behind Windows 8, opened the launch event in New York in front about 1,000 media and PC industry partners.

He showed off Windows 8's new look, but stressed that the system was built upon the base of Windows 7, Microsoft's best-selling software that recently passed 670 million license sales.

The new design of Windows, which dispenses with the Start button and features square tiles for apps, may surprise some users. Initial demand appeared solid, but customers were wary.

Early reviews of the Surface tablet were mixed, with praise for its slick hardware, but concerns about battery life and limited software and applications available.

"We've seen steady pre-order sales on Windows 8 devices from early adopters," said Merle McIntosh, senior vice president of product management at online electronics retailer Newegg. "However, we expect that most average consumers are waiting until after launch to make a purchase decision."

Investors were uncertain about the prospects for success of Windows 8, but many feel a solid launch could help Microsoft's stock, which has languished between $20 and $30 for much of the last decade.

Apple's shares have significantly outperformed Microsoft's over the past 10 years, and its market value is now more than double Microsoft's. Microsoft was little changed at $27.87; Apple fell 0.7 percent at $612.73.

"This really is about debunking the notion that Microsoft is a dinosaur and they are relevant in a new climate of tablets and mobile," said Todd Lowenstein, portfolio manager at HighMark Capital Management, which holds Microsoft shares.

"Extreme pessimism and almost utter failure is priced into the shares, so any kind of positive delivery on units, customer perception, would be really beneficial to the stock."

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  • 'It Is Undercooked'

    <a href="http://gizmodo.com/5953866/microsoft-surface-rt-review-this-is-technological-heartbreak">Gizmodo's Sam Biddle</a> had plenty to praise for the Surface RT -- for its design, its version of Internet Explorer -- before listing a litany of flaws and recommending not buying it. Wrote Biddle: <blockquote>We're not there yet. Surface is a fantastic promise, and holds fantastic potential. But while potential is worth your attention, it's not worth your paycheck. Surface RT gets so many things right, and pulls so many good things together into one package. But it is undercooked.</blockquote>

  • 'Yes, You Can Use It As Your Only Computer'

    Like Biddle, <a href="http://www.wired.com/reviews/2012/10/microsoft-surface/">Wired's Mat Honan</a> complained about typing difficulties and lack of apps, but overall was pleased. <blockquote>Yes, you can use it as your only computer. I would never have made that claim about an iPad or Android tablet. But if you only need to live in Microsoft Office and the web and e-mail, and use your computer for media consumption, you’ll do great with this. I used it as my primary computer for several days. There were applications I missed, and I would never want it to be my only computer (the keyboard and screen are just too small) but it worked. I was fine.</blockquote>

  • 'A Brilliantly Conceived Machine Whose Hardware Will Take Your Breath away — But Whose Software Will Take Away Your Patience'

    <a href="http://www.nytimes.com/2012/10/24/technology/personaltech/microsoft-unveils-the-surface-its-first-tablet-review.html?pagewanted=all&_r=2&">The New York Times' David Pogue</a> laments the "split personality" of the tablet: It's hardware is beautiful, it's software is heartbreaking. "In time, maybe the Windows RT apps will come. Maybe the snags will get fixed. Maybe people will solve the superimposed puzzle of Windows RT and Windows 8," Pogue writes hopefully. "Until then, the Surface is a brilliantly conceived machine whose hardware will take your breath away — but whose software will take away your patience."

  • 'A Slate Upon Which You Can Get Some Serious Work Done'

    <a href="http://www.engadget.com/2012/10/23/microsoft-surface-rt-review/">Engadget's Tim Stevens</a> makes another distinction: Between those who want a tablet to create or to consumer. The former, he says, will want to look closely at the Surface RT. From Stevens' review: <blockquote>The Microsoft Surface with Windows RT's $499 starting MSRP means those thinking about making the investment here will be carefully cross-shopping against same-priced offerings from Apple, ASUS and others. Where does this one rate? Very well -- but very differently. While those devices are primarily targeted at content-hungry consumers, the Surface is a slate upon which you can get some serious work done, and do so comfortably. You can't always say that of the competition.</blockquote>

  • 'Surface RT Isn’t A Tablet'

    Ultimately concluding that consumers should wait out this generation of Surfaces until Microsoft does some improvements, <a href="http://techcrunch.com/2012/10/23/microsoft-surface-rt-review/">TechCrunch's Matt Burns</a> argues that this really isn't a tablet: "It’s not a legitimate alternative to the iPad or Galaxy Note 10.1. That’s not a bad thing," he says. "With the Touch Covers, the Surface RT is a fine alternative to a laptop, offering a slightly limited Windows experience in a small, versatile form. Just don’t call it an iPad killer."

  • 'Surface Is The Most Flexible Tablet I've Ever Used'

    <a href="http://www.anandtech.com/show/6385/microsoft-surface-review/12">Tech blogger Anand Shimpi</a> called the tablet "recommendable" in a generally positive review. He writes thus: <blockquote>Surface is the most flexible tablet I've ever used. Through two seemingly simple additions to the design (but incredibly complex to actually develop and implement), Microsoft took a tablet and turned it into something much more. If you're frustrated by productivity limits of currently available tablets, Surface really seems to be the right formula for a solution. </blockquote>

  • 'It May Give You The Productivity Some Miss In Other Tablets'

    <a href="http://online.wsj.com/article/SB10001424052970204425904578074752984926268.html?mod=djemptech_t">The Wall Street Journal's Walter S. Mossberg </a>argues that if you can look past the flaws (mediocre battery life, poor app selection) buyers who want productivity out of their tablets should consider the Surface RT. "Microsoft's Surface is a tablet with some pluses: the major Office apps and nice, optional keyboards," he writes. "If you can live with its tiny number of third-party apps, and somewhat disappointing battery life, it may give you the productivity some miss in other tablets."