January 8, 2009 2:47 am

Microsoft to unveil Windows update

Microsoft is set to release a test version of its next Windows operating system this week, pushing ahead with a full launch that could come before the end of the year even if the depressed state of the PC market continues, Steve Ballmer, chief executive, said on Wednesday.

At the same time the software company unveiled deals with Dell and Verizon Wireless to extend the reach of its search business, nudging out arch-rival Google in two of the most closely watched alliances of their kind.

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However, if the weak demand for PCs that was behind Intel’s disappointing earnings on Wednesday persists for the rest of this year, the number of new machines sold will fall by about 60m to 240m, Mr Ballmer said in a Financial Times interview.

“Undoubtedly the market would have been bigger – the tide was higher 12 months ago, but that doesn’t mean that innovation is less important,” he said. “It just means people have less money to spend on a variety of discretionary items, including homes, cars and consumer electronics.”

The release of a test version of Windows 7, the next version of the operating system, to developers on Wednesday and to any interested users on Friday showed that Microsoft was on track to launch the software “within a year”, he added.

The company is expected to try to hit the Christmas season with a launch, something it failed to do with Windows Vista, though Mr Ballmer would not discuss precise timing.

Signs that Windows 7 is on track mark a sharp contrast with the troubled development of Windows Vista, which arrived years late and provoked dissatisfaction given its incompatibility with some existing software.

“We learned a lot from Vista,” Mr Ballmer said. He added that, with the earlier operating system, “we took a little bit more of a leap of faith on many new technologies and tried to bring them all together at once. It was almost too tumultuous.”

At a speech he was scheduled to give on Wednesday evening to open the annual Consumer Electronics Show in Las Vegas, Mr Ballmer was also due to announce that Microsoft’s Windows Life search software would be included on all new Dell consumer PCs.

The move would displace Google, whose search distribution deal with Dell three years ago signalled a new front in the battle between the two companies for an audience for their internet search services.

Mr Ballmer was also due to announce a deal to put Microsoft’s mobile search software on Verizon Wireless handsets in the US, also trumping Google, which had been trying to secure an alliance of its own with the big wireless carrier.

“Distribution is important, but it doesn’t flip the market quickly at all,” Mr Ballmer said of the new search arrangements. “It’s going to take a while – Google’s a great company with decent market share, and certainly a great product.”

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