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4B Daily News – Friday, October 26, 2012 By MICHAEL LIEDTKE and PETER SVENSSON AP Technology Writers Microsoft unveiled a radical redesign of its world-dominating Win- dows operating system Thursday, introducing a touch-enabled interface that attempts to bridge the gap between personal com- puters and fast-growing mobile devices powered by the company's fiercest competitors. The debut of Windows 8 heralded the biggest change to the system since 1995, when the company first offered built-in Inter- net support. And with so much riding on it, the over- haul could be Microsoft's most important product since co-founder Bill Gates won the contract to build an operating system for IBM Corp.'s first personal com- puter in 1981. To succeed, the new ver- sion will have to be innova- tive and elegant enough to attract consumers who've fallen in love with note- book computers, tablets and smartphones running software from Apple and Google. ''What you have seen and heard should leave no doubt that Windows 8 will shatter the perceptions about what a PC really is,'' Microsoft CEO Steve Ballmer crowed at a New York launching event. The first PCs and other devices running Windows 8 were to go on sale Friday. The software is designed for use on a vari- ety of machines — desktop PCs, notebook computers and tablets, including Microsoft's new Surface tablet, the first computing device the company has manufactured after focus- ing almost exclusively on software for nearly 30 years. Microsoft's risky bet: Windows 8 The redesigned operat- ing system represents an attempt to pull off a diffi- cult balancing act as Microsoft maintains its highly profitable heritage in software while trying to get a foothold in the newer, more fertile field of mobile devices. So far, the booming mobile device market has been defined and dominat- ed by Apple's trend-setting iPhone and iPad, Google's pervasive Android soft- ware and Amazon's Kindle Fire tablets. Tablets have been undercutting the sales of desktop and laptop com- puters since Apple released its pioneering iPad in 2010. Another version of Win- dows 8 will be released next week for smartphones, which are overwhelmingly dominated by Apple Inc. and Google Inc.'s Android software. ing a Windows 8 store fea- turing applications built to run on the system. The store is similar to the apps stores of Apple and Google and will include many of the same services. Microsoft is also open- will come from consumers, businesses and government agencies that buy new devices with Windows 8 already installed. There were few surpris- es because Microsoft Corp. has been previewing pre- liminary versions of Win- dows 8 for the past 13 months — part of 1 billion hours of testing. Still, the overhaul poses a big risk for the Redmond, Wash., company because Windows 8 looks and oper- ates so much differently than previous versions. ''This is the biggest gamble they've ever made,'' said analyst Richard Doherty of the Envisioneering Group. ''Does (Windows 8) do more things? Yes ... but it's not that easy to use.'' Even when users revert to a desktop mode, the redesign discards the famil- iar ''start'' button and menu that Windows has had for 17 years, a change that crit- ics believe will almost cer- tainly provoke howls of protest. But many review- ers applaud Microsoft for overhauling Windows so it greets users with a mosaic of tiles displaying applica- tions instead of relying on the desktop icons that served as the welcome mat for years. About 670 million PCs currently run on Windows. But the owners of most existing Windows machines aren't expected to switch to Windows 8 for at least a year, maybe longer. That means most of Windows 8's early usage Thursday, Ballmer expressed confidence that PC users would quickly realize the mosaic is easier and quicker to use than the old desktop format. ''You've got a whole screen as a start button!'' he said. In a brief interview Windows 8 comes with new controls. It marks the first time Microsoft has made touch-screen control the top priority, though the system can still be navigat- ed with a keyboard and mouse in desktop mode. ''In the case of Win- dows 8, seeing, touching, clicking and swiping is really believing,'' Ballmer said. He also predicted the PCs running on Windows 8 will be hailed as the best machines ever made. Some Windows 8 PCs will be hybrids that look like laptops, but also have detachable display screens containing a separate bat- tery so they can work like tablets, too. Those devices will face direct competition from Microsoft's Surface. On Thursday, Microsoft also spent time touting the Surface as a more versatile and durable alternative to the iPad, still the most pop- ular tablet on the market. At one point, a Microsoft executive dropped the Surface on the stage floor to demonstrate how difficult it is to break. In another gimmick, anoth- er Microsoft executive stood on a Surface with wheels to show it even had the strength of a skate- board. The Surface goes on sale Friday, priced at $499 for a Wi-Fi-only tablet with 32 gigabytes of stor- age. Apple charges the same price for its latest full-size iPad with half the storage capacity. The price for a separate Microsoft ''touch cover'' that also serves as an attachable keyboard starts at $120. own artillery earlier this week when it showed off a series of improvements to its own laptop and desktop computers and debuted the iPad Mini, a smaller and less expensive take on its top-selling tablet. Google will return fire Monday in New York at an event that it expected to introduce yet another smartphone and a larger version of the company's 7-inch Nexus tablet. Apple rolled out its Apple warns of holiday earnings drop new iPads and three new PCs as it heads into the holiday quarter, the biggest selling season of the year. But, para- doxically, it expects these new gadgets to bring down its profits compared to last year. The reason: the new gadgets are expensive to make, NEW YORK (AP) — Apple has a new iPhone, two Apple executives said Thursday, and the company is not interested in cutting corners for the sake of short-term returns. On top of the holiday-quarter warning, the company reported earnings for its just-ended quarter that missed Wall Street's expectations for the second quarter in a row — something that hasn't happened in more than a decade. In part, the issues facing Apple are a normal conse- quence of having so many new products, said Chief Finan- cial Officer Peter Oppenheimer. When a production line is new, it costs more to run and the components are more expensive. ''The difference this time is the sheer number of prod- ucts we're introducing at a short time,'' Oppenheimer told analysts on a call Thursday. new, smaller version of the iPad the company unveiled Tuesday. It starts at $329, well above the $199 competitors charge for similar products. Apple's price is ''aggressive,'' with a margin well below its other products, Oppenheimer said. ''When we set out to build the iPad Mini, we didn't set But Oppenheimer also singled out the iPad Mini, the out to build a small, cheap tablet, we set out to build a smaller iPad that offered the full iPad experience'' Oppen- heimer said. Apple expects a gross profit margin of 36 percent in the current quarter, the lowest figure in at least four years. In the holiday quarter last year, its gross margin was 44.7 per- cent. The gross margin represents what Apple gets from sell- ing its products, minus the cost of making them. It ignores the cost of research and development, marketing and cor- porate overhead. ed profit drop to Wall Street in similar terms. ''We're unwilling to cut corners in delivering the best product experience in the world,'' he said. ''We're manag- ing the company for the long run.'' it unveiled the iPad Mini and an upgraded full-size iPad, plus a new MacBook laptop and two desktop Macs. Apple said it expects earnings of $11.75 per share in the holiday quarter, below the $13.87 per share it earned in the same period last year. Apple routinely lowballs its esti- mates, but this time the forecast was further from the ana- lyst estimate than usual. Analysts polled by FactSet were expecting earnings of $15.59, on average. Apple expects sales of $52 billion, roughly in line with the analyst expectation of $56 billion, considering the com- pany's conservative forecasts. Apple launched the iPhone 5 a month ago. This week, extending a downward trend for the stock, which hit an all- time high of $705.07 a month ago, on the day the iPhone 5 went on sale in the U.S. and eight countries. Apple reported its results as Microsoft Corp. was set to launch Windows 8 on Friday, along with its first tablet computer, the Surface. Cook said that while he had not used the Surface himself, he gathered from reviews that it was a ''fairly compromised, confusing product'' that tries to do too many things. Part of Microsoft's message is that the Surface will double as a laptop. It's including a full ver- sion of its Office suite on the product and will be selling covers that act as keyboards. Apple shares fell $6.33, or 1 percent, to $603.47, On the same call, CEO Tim Cook justified the project- part of: A