By Gerry Shih

SAN FRANCISCO (Reuters) - Microsoft Corp is cooler than you might think.

A Reuters/Ipsos poll found that just under half of 853 respondents between the age of 18 and 29 thought Microsoft is cooler now than it was a year or two ago.

The software maker, often derided in Silicon Valley for failing to dream up products that captivate a new generation of social media and mobile savvy consumers, managed to pip Facebook Inc in the survey - only 42 percent of young adults thought the world's largest social network is cooler now than in the past. Twitter scored 47 percent, below Microsoft's 50 percent.

Part of Microsoft's lift appears to stem from a well-coordinated marketing blitz around its all-new Surface tablets, which have revamped the familiar Windows interace with a tile-based, mobile app-friendly look and feel. Its Xbox gaming console and "Kinect" accessory, which can respond to gestures and voice commands, has in the past year also burnished its image around younger consumers.

Josh Johnson, a 24-year-old media arts student at the University of South Carolina and self-professed gaming aficionado, said he has been impressed with Microsoft's consumer-oriented push with Windows 8.

"It's more customizable, and not as rigid as an Apple phone, where you have to buy all the products from Apple," Johnson said. "If you want a ringtone, you don't have to pay iTunes."

He added: "I know Apple is the cool, hip brand right now, but if Microsoft keeps coming out with new tech I'm sure it'll be back soon."

Apple Inc, despite falling out of favor with many Wall Street investors, still scored well in the Reuters/Ipsos poll, the first in a series that aims to measure brand perception and usage over time for major consumer tech brands.

About 60 percent of 18- to 29-year-old respondents still thought Apple was cooler now than in the past. But Google Inc's Android brand did even better, with a full 70 percent giving it the thumbs up.

Although "coolness" remains, at best, an amorphous concept, consumer perceptions are pivotal in determining the longevity of products, particularly in the fast-moving consumer electronics industry.

Microsoft dominates the personal computing industry and is still far larger than most other tech corporations on the planet. But it has seldom won plaudits for cutting-edge consumer technology and its share price has plateaued for a decade under CEO Steve Ballmer's watch.

Apart from Xbox and Kinect, Microsoft's past is littered with failed attempts to conquer the consumer gadget marketplace, from clunky early tablets and wrist-watch computers to the Zune music player and Kin phone.

Gartner estimates that Microsoft sold fewer than 900,000 Surface tablets in the fourth quarter, a fraction of the 23 million iPads sold by Apple. Windows phones now account for 3 percent of the global smartphone market, Gartner says, far behind Google's Android with 70 percent and Apple with 21 percent.

The survey "definitely shows that Microsoft's efforts are paying off, but we'll have to see how cool translates into customers," said Gartner analyst Michael Gartenberg. "It's also hard to compare ‘cool' factor as a quantitative measure against Apple, a company, and Android, a platform."

SOCIAL MEDIA

The poll of about 4,800 people produced fewer surprises in other areas.

In social media, 90 percent of 18- to 29-yearolds said they log in to Facebook, including 54 percent who use it "continuously throughout the day." Nearly 30 percent of respondents in their 50s, and 18 percent of those over 60, also say they use it nonstop.

Facebook's usage figures dwarf those of Twitter and Tumblr, as well as new kid on the block Pinterest, the visual "pinboard" sensation. Despite its influence in media discourse, 50 percent of young adults say they do not use Twitter. By comparison, 58 percent said they do not use Pinterest and 68 percent said they do not use Tumblr.

Harley Pruitt, an 18-year-old high school student in Newnan, Georgia, said Facebook remains the only social network she logs onto because it's the easiest way to contact friends from many years ago, while other social networks feel less accessible.

"Myspace is long gone and Twitter is confusing as all get-out," Pruitt said. "I'm a creature of habit, so I can't predict that Facebook will fade off."

The poll, which will be repeated in coming months, included responses from 4,798 people surveyed between February 5 and February 19. The data is collected online from a pool of pre-screened candidates.

The accuracy of the poll is measured using a survey technique called a "credibility interval" and is precise to within 1.6 percentage points. Among the young adult aged 18 to 29 subset, the credibility interval was 3.8 percent.

(Additional reporting by Bill Rigby in Seattle and Maurice Tamman in New York; Writing by Gerry Shih; Editing by Edwin Chan and Leslie Gevirtz)

By Bill Rigby

SEATTLE (Reuters) - U.S. tech writers have given Microsoft Corp's new Surface tablet-laptop hybrid largely negative reviews, casting a shadow over the software group's hopes to take a bite out of sales of Apple Inc's iPad and MacBook Air.

The latest Surface runs on an Intel Corp chip and features the full Windows 8 Pro operating system, which Microsoft hopes will make the device attractive to people who want to produce as well as consume material.

It also hopes to appeal to businesses who want to give employees lightweight, mobile machines that fit easily into their technology and security infrastructure.

The "Surface with Windows 8 Pro", as it is officially called, is available from Saturday. Windows co-chief Tami Reller said earlier this week it is a key part of revving up interest in Windows 8, launched last October but which has not gripped consumers' imaginations.

The Surface Pro is thicker, heavier and several hundred dollars more expensive than the first Surface RT, which runs on an ARM Holdings Plc-designed chip and is not compatible with old Microsoft programs.

Available in 64 and 128 gigabyte versions, both with wifi-only connectivity, the Surface Pro starts at $899, excluding a $120-plus keyboard. That is $200 more expensive than a comparable iPad and closer in price to the 64 GB MacBook Air laptop at $999.

Microsoft has said the device is the first to bring a full operating system to the tablet format without compromising quality. But reviewers found the device uncomfortably stranded between a tablet and a PC, with many compromises.

"It ran all the software I threw at it - both the new type and the old desktop type - speedily and well," wrote Walt Mossberg on the All Things D tech blog.

"But the Pro has some significant downsides, especially as a tablet ... It's too hefty and costly and power-hungry to best the leading tablet, Apple's full-size iPad. It is also too difficult to use in your lap. It's something of a tweener - a compromised tablet and a compromised laptop."

Mossberg said the Surface lasted less than four hours on his standard battery test, half the performance of an iPad. He also expressed concerns about the usable memory on the 64 GB version.

NOT AS GOOD

"The Pro is definitely snappier and more ‘performant' (to use a bit of Microspeak)," wrote Mary Jo Foley on the ZDNet tech blog.

However, she added: "I keep scratching my head over who Microsoft expects to buy the Surface Pro. It's not as good of a tablet, in terms of weight/battery life, as the Surface RT is. But it's also not as good of a Windows 8 PC as other OEM-produced devices, coming in at lower price points with better battery life and other specs."

Steve Kovach, writing for Business Insider, praised the specifications on the new Surface, but not the experience as a whole.

"The Surface Pro has some impressive hardware specs for such a unique form factor. It can go toe-to-toe with any other thin and light laptop," he wrote.

"(But) you can't rest the Surface Pro comfortably on your lap without it flopping around. You can't adjust the angle of the screen when it's propped on a table with the built-in kickstand," Kovach added.

"You need to spend at least another $100 to get the full laptop-like experience with one of the special keyboard covers. At 10 inches, the screen feels a bit small for traditional desktop computing.

"The cheapest model only has 23 GB of free storage, so you'll have to buy a separate memory card because you'll definitely need more than that."

David Pierce, writing on The Verge tech news site, singled out the high quality of the screen, quick startup time, the USB port on the charging hub and pressure-sensitive stylus.

But he criticized the lack of Microsoft's Office suite of applications - which have to be purchased separately - and its general awkwardness.

"Even a well-executed Surface still doesn't work for me, and I'd bet it doesn't work for most other people either," Pierce wrote.

"It's really tough to use on anything but a desk, and the wide, 16:9 aspect ratio pretty severely limits its usefulness as a tablet anyway," Pierce added.

"It's too big, too fat, and too reliant on its power cable to be a competitive tablet, and it's too immutable to do everything a laptop needs to do. In its quest to be both, the Surface is really neither."

(Editing by David Holmes)

SAN FRANCISCO (AP) — Microsoft's latest quarterly earnings slipped, even as the world's largest software maker showed modest progress adapting to a shift away from the personal computers that have been its financial foundation for decades.

The results announced Thursday are the first to include Windows 8. The program is a dramatic overhaul of the Microsoft Corp. operating system that powers most PCs. Windows 8 came out Oct. 26 with slightly more than two months left in Microsoft's fiscal second quarter.

Microsoft is counting on Windows 8 to help the company extend its franchise into tablet computers while still reaping revenue from a new breed of PCs. The redesigned software displays applications in a mosaic of interactive tiles instead of a staid menu. It can be controlled by touching on a display screen, as well as the traditional method of using a keyboard and a mouse.

Although sales of Windows 8 haven't been as impressive as investors hoped, revenue in Microsoft's Windows division climbed 24 percent from the previous year. That includes sales that had to be deferred from earlier quarters because the purchases were made before Windows 8's release.

When Windows 8 finally hit the market, Microsoft also unveiled its own tablet computer, Surface, as a showcase for the operating system. Microsoft didn't disclose Thursday how many Surface devices were sold in the October-December period.

"I don't think they want to provide that because it won't be impressive," technology analyst Patrick Moorhead said.

Analysts have estimated Microsoft sold 750,000 to 1 million of the Surface units during the quarter, far below the nearly 23 million iPads that Apple said it shipped during the same period.

Microsoft booked its Surface sales in the Window division, accounting for some of the gains from the previous year. The Redmond, Wash., company is trying to get the Surface into more hands by releasing the device in 14 more countries and coming out with a more sophisticated version that can handle all Microsoft programs. The new model, called Surface Pro, will debut Feb. 9. The one already out runs a streamlined version of Windows 8 called RT.

Analysts say it's still far too early to reach any definitive conclusions about Windows 8 prospects because it will take time for people to get used to the new system. What's more, the companies that buy most Windows machines typically wait a year or two before changing to a new version of the operating system to ensure all the bugs are worked out.

"I kind of like the Windows segment," BGC Financial analyst Colin Gillis said, adding that the 24 percent growth was "a little stronger than expected."

But another Microsoft division that includes another big moneymaker — the company's Office suite of software — didn't fare also well. Revenue in the Office division declined 10 percent, a shortfall that may have spooked some investors. Analyst Josh Olson of Edward Jones said he believes many of Microsoft's corporate customers may have held off on buying Office because a new version of that program is scheduled to come out early this year. Microsoft ended December with $788 million in deferred Office revenue. Most, if not all, that money is expected to be booked before the end of Microsoft's fiscal year in June.

Microsoft earned $6.4 billion, or 76 cents per share, during the final three months of 2012. That was down 4 percent from $6.6 billion, or 78 cents per share, a year earlier.

The company's total revenue rose 3 percent from the previous year to $21.5 billion.

The earnings were a penny above the average estimate of analysts surveyed by FactSet, while the total revenue fell below analysts' projections by about $100 million.

Microsoft's stock shed 44 cents, or 1.6 percent, to $27.19 in Thursday's extended trading, after the release of results. The stock has remained stuck below its price before Windows 8 and Surface came out, signaling that investors aren't pleased with the products' performance so far.

"This is going to be a 'show-me' year for Microsoft, and there was nothing to really shout about in this quarter," Olson said. "So what we are seeing is sort of a shrug from investors."

Microsoft is still trying to working with device makers to come up with the proper mix of machines at different prices to appeal to consumers and corporate customers, said Peter Klein, the company's chief financial officer.

"This is a big, ambitious reimagining of Windows and this quarter was the first step in that process," Klein told analysts in a Thursday conference call.

Besides debuting Windows and Surface during the most recent quarter, Microsoft also released a new version of its operating system for smartphones.

If Microsoft's revamped software for tablets and smartphones catches on, it would help the company overcome a downturn in PC sales, which has reduced licensing revenue during the past year. Worldwide PC shipments fell 3.5 percent last year, marking the industry's first annual decline since 2001, according to the research firm Gartner Inc.

Despite Microsoft's high hopes and an elaborate marketing campaign, Windows 8 appears to have gotten off to a tepid start. Technology reviews have panned the software as too confusing and cumbersome to navigate, and none of the hundreds of devices running on Windows 8 emerged as a breakout hit during the holiday season.

A big chunk of Microsoft's Windows revenue in the holiday-season quarter came from sales that were made before the new operating system's release. Excluding revenue that had been deferred from previous quarter, Windows revenue increased 11 percent from the same period in 2011.

Reiterating information released earlier this month, Microsoft said it has licensed more than 60 million copies of Windows 8. That puts the redesigned system on the same early sales trajectory as its predecessor, Windows 7, after it came out in 2009. It's unclear how many of the devices that have licensed Windows 8 are still sitting on store shelves.

___

AP Technology Writer Barbara Ortutay in New York contributed to this story.

REDMOND, Washington (AP) — Microsoft says that the pro version of its Surface tablet will be available to purchase Feb. 9 in the U.S. and Canada.

Unlike the previous version that launched in October, the "Surface Windows 8 Pro" will use the full version of Windows 8, which is compatible with programs that run on earlier versions of Windows.

The tablet will be priced starting at $899 for the model with 64 gigabytes of memory.

The price includes the Surface Pen, which allows users to write or draw on the device.

It does not include the Touch Cover keyboard, which sells separately for $120, or the Type Cover, which has depressible keys, for $130.

Microsoft hasn't released sales figures for the earlier version of Surface, which runs on Windows RT, a slimmed down version of the operating system.

RT only runs apps bought on the Windows store and a modified version of Office that Microsoft included with the device. The pro version of Surface does not come with Office installed.

By Bill Rigby

SEATTLE (Reuters) - Microsoft Corp Chief Executive Steve Ballmer is not the right leader for the world's largest software company but holds his grip on it by systematically forcing out any rising manager who challenges his authority, claims a former senior executive who has written a book about his time at the company.

"For Microsoft to really get back in the game seriously, you need a big change in management," said Joachim Kempin, who worked at Microsoft between 1983 and 2002, overseeing the sales of Windows software to computer makers for part of that time. "As much as I respect Steve Ballmer, he may be part of that in the end."

As a senior vice president in charge of a crucial part of the company's business with direct access to co-founder Bill Gates, Kempin is the most senior former Microsoft executive to write a book critical of the company, which is famous for the loyalty of its ex-employees.

His criticism echoes that of investor David Einhorn of Greenlight Capital, who called for Ballmer to step down in 2011.

Kempin left Microsoft under a cloud in 2002 as some of the aggressive contracts he crafted with PC makers were seen as fodder for the U.S. government's antitrust prosecution of the company, which started in 1998 and was largely resolved by 2002.

His book, titled 'Resolve and Fortitude: Microsoft's "secret power broker" breaks his silence', is scheduled to be published on Tuesday. He talked with Reuters by phone on Monday.

DEFEND THE THRONE

Kempin charges Ballmer with purposefully ousting any executives with potential to wrest him from the CEO seat, which he has occupied since 2000.

He said he saw the process first with Richard Belluzzo, a former Hewlett-Packard executive credited with launching the Xbox game console who rose to chief operating officer at Microsoft but left after only 14 months in the post, in the same year Kempin left.

"He (Belluzzo) had no room to breathe on the top. When you work that directly with Ballmer and Ballmer believes 'maybe this guy could someday take over from me', my God, you will have less air to breathe, that's what it comes down to."

Microsoft representatives declined comment. Attempts to reach Belluzzo were not successful.

Several leading executives, touted by outsiders at one time or another as potential successors to Ballmer, have left the company in the last few years, most recently Windows unit chief Steven Sinofsky, who departed in November.

Before Sinofsky, Windows and online head Kevin Johnson went to run Juniper Networks Inc, Office chief Stephen Elop went to lead phone maker Nokia Oyj, while Ray Ozzie, the software guru Gates designated as Microsoft's big-picture thinker, left to start his own project.

"Ozzie is a great software guy, he knew what he was doing. But when you see Steve (Ballmer) and him on stage where he (Ozzie) opposed Steve, it was Steve's way or the highway," said Kempin.

Kempin said he spoke to Ballmer around two years ago and expressed his concerns about his management style and direction of the company, but has seen no changes since. He said he sent Ballmer and Gates copies of his new book but has yet to get a reply.

"Steve is a very good business guy, but make him a chief operating officer, not a CEO, and your business is going to go gangbusters," said Kempin. "I respect that guy (Ballmer), but there are some limitations in what he can and can't do and maybe he hasn't realized them himself."

MISSED OPPORTUNITIES

In his book, Kempin writes about how Microsoft foresaw the major moves in technology in the last decade, but bungled its entry into tablets, phones and social media, ceding leadership in the technology world to Apple Inc and others.

"They missed all the opportunities they were talking about when I was still in the company. Tablets, phones...we had a tablet going, we had tablet software when Windows XP came out, it was never followed up properly," said Kempin.

He also claims the decline of PCs is partly due to Microsoft's mismanagement of hardware makers, an area that Kempin oversaw at Microsoft.

"Just think about the insult of Microsoft coming out with a tablet themselves, trying to mimic Apple, and now they are going to come out with a notebook on top of it," said Kempin, referring to Microsoft's Surface RT tablet and soon-to-be-released Surface running Windows Pro.

Several PC makers went public with their unease about Microsoft's decision to make its own computers last year.

Kempin reserves his most pointed criticism for Ballmer.

"Is he a great CEO? I don't think so. Microsoft's board is a lame duck board, has been forever. They hire people to help them administer the company, but not to lead the company. That's the problem," said Kempin.

"They need somebody maybe 35-40 years old, a younger person who understands the Facebook Inc generation and this mobile community. They don't need this guy on stage with this fierce, aggressive look, announcing the next version of Windows and thinking he can score with that."

(Reporting By Bill Rigby; Editing by Matt Driskill)

Personal computer makers, trying to beat back a tablet mania that's eating into their sales, are making what may be a last-ditch attempt to sway customers by mimicking the competition.

Many of the laptops to be unveiled around the world in coming months will be hybrids or "convertibles" - morphing easily between portable tablets and full-powered laptops with a keyboard, industry analysts say.

The wave of hybrids comes as Intel Corp and Microsoft Corp, long the twin leaders of the PC industry, prepare to report results this week and next. Wall Street is predicting flat to sluggish quarterly revenue growth for both, underscoring the plight of an industry that has struggled to innovate.

In 2013, some are hoping that will change.

With the release of Microsoft's touch-centric, re-imagined Windows 8 platform in October and more power-efficient chips from Intel, PC makers are trying to spark growth by focusing on creating slim laptops with touchscreens that convert to tablets and vice versa.

Microsoft, expanding beyond its traditional business of selling software, is expected this month to roll out a "Surface Pro" tablet compatible with legacy PC software developed over decades.

That's a major selling point for corporate customers like German business software maker SAP, which plans to buy Surface Pros for employees that want it, said SAP Chief Information Officer Oliver Bussmann.

"The hybrid model is very compelling for a lot of users," Bussmann told Reuters last week. "The iPad is not replacing the laptop. It's hard to create content. That's the niche that Microsoft is going after. The Surface can fill that gap."

Apple's iPad began chipping away at demand for laptops in 2010, an assault that accelerated with the launch of Amazon.com Inc's Kindle Fire and other Google Android devices like Samsung Electronics' Note.

With sales of PCs falling last year for the first time since 2001, this year may usher in a renaissance in design and innovation from manufacturers who previously focused on reducing costs instead of adding new features to entice consumers.

"People used to be able to just show up at the party and do well just because the market was going up," Lisa Su, a senior vice president at Advanced Micro Devices, which competes against Intel. "It's harder now. You can't just show up at the party. You have to innovate and have something special."

At last week's Consumer Electronics Show in Las Vegas, devices on display from Intel and others underscored the PC industry's plan to bet more on convertible laptops.

Lenovo's North America President Gerry Smith told Reuters last week that over the holidays he sold out of the company's "Yoga", a laptop with a screen that flips back behind its keyboard, and the "ThinkPad Twist", another lightweight laptop with a swiveling screen.

Intel itself showed off a hybrid prototype laptop dubbed "North Cape", housed in a thin tablet screen that attaches magnetically to a low-profile keyboard. And Asus showed a hefty 18-inch, all-in-one Windows 8 PC that converts to a tablet running Google's Android operating system.

Lenovo and Asus, which have both won positive reviews for their devices in recent months, increased their PC shipments by 14 percent and 17 percent respectively last year, according to Gartner.

"The number of unique systems that our partners have developed for Windows has almost doubled since launch. That gives an indication of how much innovation is going into the PC market," Tami Reller, chief financial officer of Microsoft's Windows unit, told Reuters.

FINGER-POINTING

To be sure, hybrids with detachable or twistable screens do not yet account for a significant proportion of global PC sales, and consumers still need to be sold on their benefits.

Previous attempts by PC makers to reinvigorate the market have had limited success. Pushed by Intel, manufacturers launched a series of slimmed down laptops early last year with features popular on tablets, like solid-state memory.

They were too expensive, often at more than $1,000 apiece, and failed to arrest the PC decline.

Microsoft's Windows 8 launch in October brought touchscreen features but failed to spark a resurgence in PC sales many manufacturers had hoped for. A round of finger-pointing ensued, with PC and chip executives blaming a shortage of touchscreen components and others saying it was the manufacturers that sharply underestimated consumer demand for touch devices.

Regardless, the entire PC ecosystem is onboard for 2013. Almost half of the Windows laptops rolled out this year may have touch screens. Of those, most will be in convertible form, according to IDC analyst David Daoud.

Further blurring the distinction between kinds of devices, about a quarter of upcoming Windows 8 gadgets will be tablets that can easily act as laptops with the help of keyboard accessories, he added.

But buyers may have to wait until the second half of the year to see many of them.

"The most likely scenario today is for the industry to have these products ready for the back-to-school season," Daoud said.

(Reporting and writing by Noel Randewich; Additional reporting by Poornima Gupta and Bill Rigby in Seattle; Editing by Tim Dobbyn)

By Bill Rigby

LAS VEGAS (Reuters) - Holiday-season sales of personal computers fell for the first time in more than five years, according to tech industry tracker IDC, as Microsoft Corp's new Windows 8 operating system failed to excite buyers and many instead opted for tablet devices and smartphones.

The slump caps a miserable year for PC makers such as Hewlett-Packard Co, Lenovo Group and Dell Inc, which saw the first annual decline for more than a decade with no immediate signs of relief.

It underscores an unspectacular launch for the latest version of the Windows franchise, which Microsoft is banking on to fight off incursions into the PC arena by touch-friendly devices such as Apple Inc's iPad.

"The sense is that until Windows 8 is fully installed and prices start to come down, we will be in this state of negative dynamics in the PC market," said Aaron Rakers, an analyst at Stifel, Nicolaus & Co.

Still, analysts warn against counting out Windows 8 -- the most radical change in the operating system in 20 years -- as consumers grow more comfortable with its tile-based interface and touch features.

In the past, a new operating system from Microsoft tended to stimulate a spurt of PC sales, but PC makers simply did not get enough attractive machines into the market, said IDC.

"Lost in the shuffle to promote a touch-centric PC, vendors have not forcefully stressed other features that promote a more secure, reliable and efficient user experience," said Jay Chou, senior research analyst at IDC.

This year could be better, he suggested, even in the face of talk about the death of the PC as tablets are on track to outsell full-featured machines for the first time in the United States.

"As Windows 8 matures, and other corresponding variables such as Ultrabook pricing continue to drop, hopefully the PC market can see a reset in both messaging and demand in 2013," said Chou.

PC makers sold 89.8 million units worldwide in the fourth quarter of last year, down 6.4 percent from the same quarter of 2011. That was slightly worse than expected by most, and the worst performance for more than five years, when the global economy shuddered to a halt and ushered in the worst recession since World War II.

For all of 2012, 352 million PCs were sold, down 3.2 percent from 2011. That was the first annual decline since 2001, according to IDC, in the wake of the tech stock crash and the September 11 attacks.

IDC is forecasting a meager 2.8 percent growth in PC sales for 2013.

"There's a lack of compelling reasons to upgrade," said Ashok Kumar, an analyst At Maxim Group, who said people are now waiting up to 10 years to replace computers rather than five in the past.

"Increases in performance have been smaller and there are fewer new applications that require more computing horsepower," he said. "In developing markets, the first purchase is not a PC, it's a smartphone, especially in markets where literacy levels are low."

NO MIRACLES AT CES

The numbers are bad news for Microsoft, which still provides the underlying software for nine out of 10 PCs but is suffering as Apple's iPad and other tablets eat away at the cheap end of the PC market.

Touch-friendly Windows 8 and Microsoft's own Surface tablet were designed to counter that shift, but the radical new-look software has not gripped consumers' imaginations.

"Windows 8 wasn't going to be as big a catalyst," said Shaw Wu, analyst at Sterne Agee. "It's so different, it's almost uncomfortably different from past Windows, and there's a risk that Windows 8 ends up like Vista."

Windows Vista, released worldwide in 2007, was Microsoft's least popular operating system with users in recent years.

Microsoft pulled out of the Consumer Electronics Show in Las Vegas this year, vacating its usual sprawling display area, but PC makers such as Asustek, LG Electronics and Samsung Electronics filled the gap with a dizzying array of big screen computers, lightweight laptops, tablets and combinations of those, all running Windows 8.

Many of the new models attracted jostling crowds on the show floor, like Panasonic Corp's 20-inch ultra-high-definition tablet and Razer's dedicated Edge tablet for PC gamers.

But none was hailed a show-stopper that might single-handedly turn around the fortunes of Windows.

"No single device will spur sales, it will take time for consumers to learn that Windows 8 even exists. CES will do little to change that," said Sarah Rotman Epps, an analyst for tech research firm Forrester. "Windows 8 is going to be a slow ramp, regardless of hardware quality."

Microsoft says it feels good about the progress of Windows 8, as sales hit 60 million this week after 10 weeks on the market. That is in line with Windows 7 three years ago, and well ahead of Vista, which took 100 days to reach 40 million sales.

Tami Reller, chief financial officer of Microsoft's Windows unit, said sales of Windows 8 PCs may have been held back by shortages of the most popular touch-screen machines.

"The level of demand I think surprised a lot of people. And frankly, the supply was too short," said Reller at an analyst presentation at CES this week.

Microsoft is looking to juice that demand further this month with its new Surface with Windows 8 Pro, a tablet running an Intel processor that is fully compatible with Office and traditional PC programs, unlike the first Surface it launched last year based on an ARM Holdings-designed chip.

Despite that bullishness, analysts have been edging down their earnings expectations for Microsoft lately.

"Win 8 is disappointing, the PC market will remain weak for awhile and margins are likely capped," said Morgan Stanley analyst Adam Holt on Thursday, as he downgraded the stock to 'equal-weight' from 'overweight'.

Investors are also nonplussed, driving Microsoft's shares down neraly 20 percent since last March, even as the Standard & Poor's 500 has marched upward to a five-year high this week. The shares are down 6 percent since the launch of Windows 8 on October 26.

(Additional reporting by Poornima Gupta, Miyoung Kim, Timothy Kelly, Sinead Carew and Noel Randewich in Las Vegas, and Alistair Barr and Alexei Oreskovic in San Francisco.; Editing by Gary Hill and Steve Orlofsky)

By Bill Rigby

LAS VEGAS (Reuters) - Microsoft Corp has sold 60 million licenses and upgrades for its new Windows 8 operating system in the 10 weeks since its launch, one of the top executives of the company's Windows unit said at the Consumer Electronics Show on Tuesday.

The figure marks a solid but unspectacular start for Microsoft's new flagship product, which has not managed to revive flagging personal computer sales this year, while new touch-screen Windows devices have not yet captured consumers' imaginations.

Windows 8 sales are broadly in line with those of Windows 7, Microsoft's last operating system launched in 2009, said Tami Reller, chief financial officer of the Windows division, in a presentation to analysts and investors at the annual tech show in Las Vegas.

Reller did not say how many of its new Surface tablets - designed to tackle Apple Inc's iPad head on - Microsoft had sold.

Final figures for PC sales in 2012, due in the next week or so from industry tracking groups, are expected to show the first decline for a decade as consumers move towards mobile computing on powerful tablets and phones. Microsoft's app-based, touch-friendly Windows 8 system is an attempt to adjust to that shift.

(Reporting By Bill Rigby; Editing by Gary Hill)

LAS VEGAS (AP) — Many people who have tried Microsoft's new Windows 8 operating system without a touch screen have hated it because of the inability to use touch and swipe commands to get things going. Now, a company has made a digital pen to allow people to use Windows 8 on their old monitors for less than the cost of buying a new touch-enabled computer.

The device was unveiled this week at the International CES, an annual showcase in Las Vegas for the latest smartphones, tablet computers and other consumer-electronic devices.

WHAT IT IS: E Fun, a West Covina, California-based company, has come out with the Apen Touch8, a cordless pen that works in tandem with an attachment that plugs into the Windows computer's USB port.

HOW IT WORKS: The attachment, which is really an infrared and ultrasonic receiver, clips magnetically to the side of the screen, which can be as large as 17 inches (43 centimeters) diagonally. The pen emits an infrared beam out of its tip. The receiver attachment sends the pen's signals to the computer, which interprets its precise location.

Pushing down on the pen results in a separate ultrasonic signal, which is equivalent to a touch screen sensing when you are touching it. Just like that, you can swipe and tap your way through Windows 8. The pen runs on a watch battery, which should last about 500 hours and is replaceable.

WHY IT'S HOT: Windows 8, Microsoft Corp.'s effort to make desktop and laptop computers work more like tablet computers, was released in October to mixed reviews. A major problem is the fact that many of the features require a touch-screen monitor to work, making the experience unpleasant for those with older machines. Apen Touch8 offers a way for those with older computers to experience the newer touch-based functions.

AVAILABILITY: The pen is to go on sale in North America by the end of March for $80.

When thieves broke into Microsoft's offices in Mountain View, Calif., last month, more than a few of the company's products -- perhaps even new Surface tablets -- were presumably lying around.

But instead, they swiped five Apple iPads -- and nothing else, according to police.

Thieves broke into Microsoft's offices at 1075 La Avenida Road sometime between Dec. 19 and Dec. 26, Mountain View Police Sgt. Sean Thompson confirmed to the Huffington Post on Tuesday. It remained unclear how they entered the building, he said.

A Microsoft employee told police that the staff owned iPads because they were testing Microsoft software applications for Apple products, Thompson said. He said police have no suspects and are still looking over surveillance video.

"Theft of iPads aren't unusual, but the place where it took place is, to me, unusual," Thompson said. "It's an Apple product at a Microsoft office."

News of the theft, which was first reported in the Palo Alto Daily Post, is the latest sign that Apple's iPad remains the most sought-after in the tablet market, which since October has included the Microsoft Surface.

In November, Microsoft CEO Steve Ballmer said sales of Microsoft's tablet were "starting modestly." But NPD, a retail sales tracking firm, said sales of Windows 8 tablets had been “almost nonexistent" during a four-week period from Oct. 21 to Nov. 17, making up less than 1 percent of all Windows 8 device sales.

In addition, Wall Street analysts from Piper Jaffray said they found shoppers at an Apple Store on Black Friday in the Mall of America in Minneapolis bought an average of 11 iPads per hour, while not one Microsoft Surface tablet was sold at a nearby Microsoft store during a two-hour period when analysts monitored the store.

A Microsoft spokeswoman said the company was still looking into the theft at its Mountain View offices and declined to comment.

Apple products have proven especially attractive to thieves. Last month, the New York Police Department attributed an increase in the city's crime index to a rise in thefts of Apple products -- with no mention of other companies' devices.

This story has been updated with additional comments from Mountain View Police Sgt. Sean Thompson.

Dealnews:

We may have survived the apocalypse, but the nation's economy still has a grim forecast. To help ring in the new year on a positive note, we've highlighted 11 items that will be cheaper in 2013. From streaming video services to mobile shopping, below are our predictions on what will cost less in the coming year.

Conversely, if you want to know which goods and services will cost more next year, check out our list of things that will be more expensive in 2013.

* Exec sees "exciting" reaction from consumers

* Staples to sell Surface from Wednesday

SEATTLE, Dec 11 (Reuters) - Microsoft Corp has stepped up manufacturing of the Surface tablet, its new device designed to counter Apple Inc's iPad, and will introduce it to third-party retailers this week.

The moves suggest Microsoft is seeing some demand for its first own-brand computer in the crucial holiday shopping season, although it has yet to divulge any sales figures.

"The public reaction to Surface has been exciting to see," said Panos Panay, general manager of Microsoft's Surface project, which forms part of the company's Windows unit.

"We've increased production and are expanding the ways in which customers can interact with, experience and purchase Surface," said Panay, but gave no details of how many extra units were being produced.

Panay did not mention names of retailers that will sell the Surface, but separately office equipment retailer Staples Inc said it would stock the tablet from Wednesday.

He said the Surface would also be on sale at retailers in Australia from mid-December, with more countries to follow in the next few months.

Since launch in late October, the Surface has only been sold by Microsoft itself, in its own brick and mortar stores in the United States and Canada and online in Australia, China, France, the UK and Germany.

The only Surface model available now - officially called Surface with Windows RT - runs a version of Windows created to work on the low-power chips designed by ARM Holdings, which dominate smartphones and tablets but are incompatible with old Windows applications.

It starts at $499 for the 32 gigabyte version plus $120 for a thin cover that doubles as a keyboard.

A larger, heavier tablet - called Surface with Windows 8 Pro - will be introduced in January, running on an Intel Corp chip that works with all Microsoft's Windows and Office applications. Microsoft plans to price the new Surface from $899 for a 64 gigabyte version.

The world's largest software company also said it would keep its chain of 'pop-up' holiday stores open into the new year and will convert them into permanent retail outlets or what it called "specialty store locations".

Microsoft's recent push into physical retail - following Apple's great success - has resulted in 31 permanent stores plus 34 holiday 'pop-up' stores in the U.S. and Canada.

If Microsoft converted each of the temporary stores into permanent outlets it would have 65 stores, still well below Apple with almost 400 worldwide.

We really wanted the Microsoft Surface to succeed, if for nothing else but to light a fire under Apple to step its game up on the iPad. And with sales of the basic Surface RT apparently "modest," according to CEO Steve Ballmer, Microsoft needs its more heavy-duty Surface Pro tablet to catch consumers' eyes. After all, the Surface Pro comes with processing power that is supposed to appeal to Windows-using business types.

Too bad suits will hardly be able to open a spreadsheet without draining the battery down to nothing.

On Thursday, among the other details we learned about Surface Pro, set to hit shelves in January, Microsoft exposed a fatal weak spot in Microsoft's $899 super-tablet: It has half the battery life of Surface RT.

Just read what Microsoft's @Surface handle tweeted to a customer:

@shahroom Hey Shahroom, #Surface pro will have approximately half the batter life of Surface RT.

— Surface (@surface) November 29, 2012

Microsoft has officially advertised the RT's battery life at 8 hours of reading and 7.5 of video time; some reviews, such as Engadget's, were able to eke out an extra 1.5 hours more. Thus, a conservative estimate for Surface Pro battery life would peg it at 4.75 hours. At worst, the tablet's battery life would last only 4 hours.

The iPad, by comparison, gets 10 hours of battery life "while surfing the web on WiFi, watching videos, or listening to music," according to Apple. What's worse, the iPad's price tag starts at $400 less than the Surface Pro.

Tech blog after tech blog has joined the pile-on that ensued over Microsoft's tweet. The New York Times' Brian X. Chen even tweeted a preemptive eulogy for the Surface Pro: "RIP in advance".

In 2012, a tablet device with a 4 or 5-hour battery life doesn't look all that appealing (especially when its price tag is significantly higher than the most popular device on the market). Users -- especially businesspeople on the road -- are away from power outlets for more than four or five hours practically every day.

Maybe Microsoft has another explanation. If it does, we're willing to wait for it because, again, the Surface was supposed to be a new hope against the Apple empire. Until then, Surface Pro may very well be D.O.A.

[h/t ZDNet]

Update: Some readers have written in the comments section that the comparison between the Surface Pro and the iPad is misguided and that Surface Pro ought to be compared to the MacBook Air instead. It's true that it's difficult to decide whether the Surface Pro should be classified as a tablet or ultrabook, as Ars Technica's Peter Bright explains here. The MacBook Air gets "up to 5 hours of battery life on a single charge on the 11-inch model and up to 7 hours on the 13-inch model," according to Apple's website, which compares better to the supposed 4 to 4.75 hours the Surface Pro would get based on the tweet above.

Correction: The original version of this article implied that the Microsoft Surface RT does not come with Microsoft Office. It has been changed to reflect the fact that Surface RT comes with a pre-installed, non-business version of the software.

Check out the reviews of Microsoft's other tablet, the Surface RT:

This week, Microsoft announced that it sold a truly bananas 40 million licenses of Windows 8 in the new operating system's first month of availability.

Even though some unknown portion of those sales are to manufacturers like Dell and Hewlett-Packard -- who then have to convince consumers to purchase their laptops, desktops, hybrids and whatnots -- and even though certain analysts insist that this marks a "disappointing" debut for the new Windows, 40 million licenses in one month is still an incredible number.

To put it in context, the most iPhones Apple has ever sold in three months is 37 million, upon the release of the iPhone 4S in late 2011. Microsoft just topped that, by one measure, in slightly more than 30 days.

The eternal battle between Apple and Microsoft notwithstanding, this means in a practical sense that there are already a whole bunch of PC users on Windows 8, with many more coming once Christmas shopping ramps up this December. It raises a key question: Will the existence of all these users convince developers to actually start writing apps for Windows 8?

Here's why I ask: I've been using Windows 8 computers as both primary and secondary devices for more than a month now. I've got a Microsoft Surface (with five different keyboards of many different colors, for some reason), as well as two touchscreen Windows 8 laptops, from Toshiba and Asus. I've found the experience on all three machines to be satisfactory and smooth overall. But if I had to pinpoint the most glaring problem with the operating system currently, it would be the relatively barren Windows app store, which sorely lacks apps built specifically for the new Windows.

The barren cupboard that is the Windows Store is especially troublesome on the Surface, which runs a tablet-optimized version of Windows 8 called Windows RT and which cannot run apps developed for older versions of Windows.

And that's trouble, my friends: For the Microsoft Surface, and other Windows 8 tablets, there's no Facebook, and no Twitter apps; no Spotify or Rdio or Rhapsody; no decent support for Gchat, or Google Reader, or Gmail; no Temple Run or Words with Friends or Draw Something. And not only are some of those mammoth, must-have apps still missing, but there's also no high-quality alternatives (think TweetDeck, or Sparrow, or HootSuite) to fill the voids left by those glaring absences.

All you have are the Microsoft-built alternatives, like Xbox Music and the People app, which just cannot deliver the same comprehensive experience as more focused applications.

Will this change soon? With 40 million licenses accounted for, Microsoft has a strong case with developers to get crack-a-lacking on Windows 8 apps. And yet as clear as that argument seems, whether developers will actually respond with well-written, robust programs remains murky.

The hesitance of developers to commit resources to Windows Phone seems relevant here. Talking to Microsoft executives about the infamous lack of quality apps for Windows Phone over the past couple years, they always remained privately confident that once Windows Phone picked up meaningful market share, the great apps would follow. Windows Phone has still yet to gain a foothold (in America, at least), and the app situation on Windows Phone, though improving, still lags far behind that of iOS and Android.

Now, on Windows 8, we have exactly what those executives had hoped for: a glut of new users on the operating system just waiting for apps to become available in the Windows Store. Even StatCounter's conservative estimate of 15 million users on Windows 8 represents a consequential base of credit card-carrying computer owners.

"Developers are generally rational folks," Ina Fried of AllThingsD wrote recently. "They have limited time, and tend to focus their energy where the eyeballs and dollars are."

Now that there are tens of millions of eyeballs on Windows 8 -- and potentially an equal number of dollars -- will the Windows Store overflow with new apps, as "rational" developers flock to an underserved, uncompetitive land of opportunity? Or will the Windows 8 app store remain, as it does on Windows Phone, the Achilles' heel of Microsoft's huge new venture, that one overwhelming drawback which prevents the next 40 million PC owners from hopping on the 8 train?

Are you an app developer? Has Microsoft's announcement of 40 million Windows 8 sales convinced you to start writing a program for the operating system, or are you waiting for something else? Send me an email at jason.gilbert@huffingtonpost.com and let me know.