Microsoft Shows Touchscreen Tablet PC

Microsoft Corp. (MSFT) Chief Executive Officer Steve Ballmer introduced a touch-screen tablet computer from Hewlett-Packard Co. and said U.S. sales of PCs running Windows jumped 50 percent over the holidays.

The computer will go on sale this year and was one of several machines that Ballmer showed off last night at the Consumer Electronics Show in Las Vegas. The sales growth from the year-earlier period is based on data from U.S. retail outlets monitored by research firm NPD Group Inc.

"We're talking about something that's almost as portable as a phone and that's as powerful as a PC running Windows 7," Ballmer, 53, said of the Hewlett-Packard tablet computer and two others he had on stage.

Microsoft has renewed its focus on tablet computers at a time when Apple Inc. (AAPL) may be poised to unveil its own model this month. Microsoft, the world's largest software maker, wants to highlight the touch-screen features of Windows 7, which went on sale in October. Palo Alto, California-based Hewlett-Packard and other computer makers have sold such devices with Microsoft software since 2002, with little success.

"H-P has been a longtime supporter of the category, so in some sense this is just another iteration," said Roger Kay, an analyst with Endpoint Technologies Associates in Wayland, Massachusetts. "If Apple totally blows the category away, Microsoft and H-P won't be happy having come out a month in advance with something that's just OK."

Apple plans to introduce its tablet computer this month, a person familiar with the matter said this week.

Touch-Screen FeaturesBallmer also announced that Redmond, Washington-based Microsoft's Bing search engine will be the default choice on Hewlett-Packard's computers worldwide, expanding an agreement that previously covered the U.S. and Canada. The companies also extended the accord to three years from one.

Ballmer showed several types of computers that use new features of Windows 7, including an all-in-one PC with a touch screen from Lenovo Group Ltd. and a machine from Asustek Computer Inc. that supports three-dimensional gaming. Microsoft's focus with these devices is not on Apple, said Robbie Bach, president of Microsoft's entertainment and devices unit.

"The point is the PC ecosystem is very rich and expanding rapidly, with a lot of innovation," Bach said in an interview.

Microsoft fell 19 cents to $30.77 yesterday in Nasdaq Stock Market trading. The shares jumped 57 percent last year. Hewlett- Packard, which advanced 42 percent last year, dropped 49 cents to $52.18 on the New York Stock Exchange.

Early ModelsEven after years on the market, less than 1 percent of notebook computer sales are tablets, Kay said. Hewlett-Packard and Microsoft have gone down this road before. One of Hewlett- Packard's early models using Microsoft's touch-enabled operating system was a slate design that could be docked on a desktop computer.

Later models from Hewlett-Packard (HPQ), including one shown this week, have been convertible notebooks with a screen that swivels and can be folded down to create a slate. Those devices are a "hedge," Kay said.

"You were saying to the customer, 'Here if you don't really like it, well, it's a regular notebook.'" Kay said. With the Apple and Hewlett-Packard products, the idea of a slate form is re-emerging in the consumer market, he said.

Ballmer also said Microsoft has sold 39 million Xbox 360 consoles since they went on sale in late 2005, up from 30 million at the end of May.

A motion-sensing game device, code-named Natal, will be available next Christmas, he said, confirming comments by a video-game executive in July. Microsoft also announced that AT&T Inc. (T) plans to allow its customers later this year to use the Xbox 360 as a television set-top box for its U-Verse service, which provides video over phone lines.

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