Microsoft's news at CES not so new

LAS VEGAS — With the tech world's eyes focused on it Wednesday, Microsoft introduced Windows 7, a product many enthusiasts have already become familiar with.

In addition to announcing the widely expected test version of Windows 7 going out this week, Microsoft announced deals it was rumored to have won with PC maker Dell and Verizon Wireless; new "Halo" video-game titles it had already unveiled; and Xbox 360 sales statistics it touted Monday.

Some observers said the company's presentation at the International Consumer Electronics Show was as devoid of news as any it has given in the past half-decade — possibly by design.

Microsoft Chief Executive Steve Ballmer took his turn in the coveted CES pulpit, from which Bill Gates had delivered his sermon on technology's future each year for the past decade.

The presentation was entertaining at times, but also sober. Ballmer was realistic about the economic backdrop against which this industry meets. He was also resolutely optimistic about the power of technology.

"It feels like we've entered a period of reduced expectations, a time when we may be tempted to temper our optimism and scale back our ambition," Ballmer said.

"But no matter what happens with the economy, or how long this recession lasts," Ballmer said, "I believe our digital lives will only continue to get richer. There really is no turning back from the connected world and the pace of technological advance bringing people closer together."

The chief executive rehashed his company's already well-articulated vision of offering software and services across the "three screens": computers, televisions and mobile devices.

"The linchpin for bringing all of this together for you will be Windows," Ballmer said.

Confirmation of the Windows 7 Beta version, available to computer professionals Wednesday and the rest of the public Friday, fueled speculation that the final version could be released ahead of its publicly stated January 2010 target — perhaps in time for holiday shopping or even back-to-school computer sales in the early fall.

"I guess CES is being used as a sort of broad market introduction to Windows 7," Matt Rosoff, an analyst with Kirkland-based Directions on Microsoft, said after being briefed on Microsoft's announcements in advance.

Other major product introductions may have been held off to give Windows a wide berth, or perhaps they weren't ready for prime time.

"In the past, they made an effort to really have something new at CES," said Rosoff.

Deals

Microsoft announced two big wins for its search engine, which has struggled to gain market share as Google has continued to grow.

In the first deal, the company displaced Google as the search partner on new Dell consumer and small-business PCs. Microsoft's Live Search, as well as the new Windows Live Essentials online services, will be preloaded on new machines.

Dell had 13.6 percent of the global PC market in the third quarter of 2008, according to Gartner. Hewlett-Packard, with whom Microsoft announced a North American search-distribution deal that began this month, had 18.4 percent. In 2007, Microsoft announced a similar global deal with Lenovo.

Now the key is making sure the search results don't disappoint new users. "Otherwise they'll shift the default or type in www.google.com and that will be the end of it," Rosoff said.

Other analysts are skeptical of the value of search-distribution deals to the company.

"[T]hey don't stop the Google habit," wrote Danny Sullivan, editor of the online news site Search Engine Land, in a Dec. 30 essay. "Give someone a new computer set by default to search at Microsoft, and I think there's an excellent chance they'll still go to Google."

The second deal announced Wednesday offers Microsoft search, advertising and other services to all Verizon Wireless subscribers in the United States, beginning in the first half of this year. The five-year arrangement applies to new phones.

Microsoft apparently beat out Google for this, too, in negotiations that reportedly dragged on for two years.

In November, The Wall Street Journal reported Microsoft was offering Verizon guaranteed search-advertising revenue of between $550 million and $650 million over the life of the deal, roughly twice Google's offer. Others have suggested those figures were inflated.

Microsoft did not comment on the financial terms. Robbie Bach, president of Microsoft's Entertainment & Devices Division, said in an interview the economics were less important than the long-term strategy.

Xbox

On Monday, Microsoft declared 2008 the best year yet for its video-game-console business.

The company said it had sold 28 million Xbox 360 consoles since the system's introduction in 2005; that's up 58 percent from last year.

It also counts 17 million subscribers to the Xbox Live online entertainment network, which is being outfitted with a Primetime channel.

It's an online venue for people to compete in game shows, starting with "1 vs. 100," against thousands of other players.

Bach, in the interview, acknowledged the games business did notice some softness because of the economy. "Last year, if they were buying five games when they bought a console, maybe this year they only bought four," he said.

Halo

This year will see the launch of two new titles in the blockbuster "Halo" franchise, widely credited with making the original Xbox, launched in 2001, a success.

"Halo Wars," a strategy-based riff on the space-combat series, is due March 3 from Microsoft's Ensemble Studios, a date announced in December.

Another title, "Halo 3 ODST," (for Orbital Drop Shock Trooper — a class of soldier in the game), is coming in the fall. This title is from Kirkland-based Bungie Studios, the originator of the "Halo" franchise, which split from Microsoft shortly after the record-setting launch of "Halo 3" in 2007.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com