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CES kicks off with speech from Microsoft CEO

Microsoft CEO Steve Ballmer delivers a keynote address at the 2011 International Consumer Electronics Show at the Las Vegas Hilton January 5, 2011 in Las Vegas, Nevada. CES, the world's largest annual consumer technology tradeshow, runs from January 6-9 and is expected to feature 2,700 exhibitors showing off their latest products and services to about 126,000 attendees.

Justin Sullivan/Getty Images/Justin Sullivan/Getty Images

Microsoft CEO Steve Ballmer kicked off the world's biggest consumer electronics conference Wednesday with a speech that included several product announcements but no major consumer product launches.

Mr. Ballmer's keynote speech has marked the unofficial start of the Consumer Electronics Show in Las Vegas for the past few years. This year, Mr. Ballmer announced a number of new additions to Microsoft's Xbox gaming machine, its smart phone operating system and Windows 7 for PCs.

Microsoft is expanding its presence as a hub for consumer entertainment through the Xbox gaming system. Late last year, Microsoft launched Kinect, a motion-based user interface system that let users play games and perform other task without any controller.

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This spring, Microsoft is launching various additions to Kinect, including deals with streaming movie company Netflix, as well as ESPN.

Since Mr. Ballmer's speech this time last year, Microsoft has focused more of its efforts on the mobile space, launching Windows Phone 7 in November in an attempt to better compete with smart phones powered by operating systems from Google, Apple and Research In Motion.

This year, the company announced a number of new games for Windows smart phones, leveraging its other properties by linking some of those games with their Xbox counterparts, for example by letting users transfer in-game currency from one platform to the other.

The company also showcased a number of new third-party PCs that use Windows 7, including dual-touchscreen laptops and touchscreens that also support stylus input.

Ballmer also detailed a shift from Microsoft's long-standing and lucrative alliance with Intel Corp, announcing the company was teaming up with Britain's ARM Holdings to take on Apple Inc. in the red-hot tablet and smartphone arena.

Microsoft plans to design a Windows operating system compatible with chips designed by ARM , an Intel rival and the dominant producer of chips for smartphones and tablet computers.

Ballmer pitched the move in a typically ebullient opening address, looking to convince investors that his company can hold its dominance in a world moving away from PC-centric computing.

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"Whatever device you use, now or in the future, Windows will be there," said Ballmer, stalking the stage in a packed, supportive auditorium, in his trademark blue shirt and slacks. "Windows will be everywhere on every kind of device, without compromise."

Microsoft's move is the latest major win for ARM, which is making huge strides in mobile computing and on Wednesday also announced that graphics chipmaker Nvidia will begin designing central microprocessors for computers based on ARM architecture.

Microsoft's new approach marks a shift away from Intel , whose chips have held a hegemony on Windows operating systems on personal computers, and suggests the breakdown of the fabled "Wintel" alliance, which set the standard in early computing.

"It's highly symbolic, the Wintel duopoly that was such a good partnership for so long is fraying at the edges a little bit," said Todd Lowenstein, a portfolio manager at HighMark Capital Management.

The U.S. software maker offered no time frame for the launch of the ARM-supported operating system version, but Windows unit chief Steven Sinofsky said Microsoft typically aims for 24 to 36 months between major Windows versions, suggesting a launch date of between October 2011 and October 2012.

That means tablets capable of taking on Apple's iPad may be a year or more in coming, running the risk of leaving it too late to catch up with Apple's iPad, and betting that tablets will be an enduring new market.

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"It's still early in the adoption phase for tablets," said Lowenstein. "Prices will be coming down, there is a mass market opening up even more, and both Intel and Microsoft have the capability to catch up. Microsoft has made a business model out of second-mover advantage, using its scale to crush opponents."

Research firm Gartner expects worldwide smartphone sales to treble to 851 million units by 2014, while it sees tablets increasing seven-fold to more than 150 million units by 2013.

In comparison, PC sales are expected to increase at a much more sedate pace, close to 15 percent this year, rising to 610 million units worldwide by 2014, according to Gartner. By that time, Gartner expects tablets to have displaced about 10 percent of PC sales.

With files from Reuters

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