In the opening CES keynote this year, CEO Steve Ballmer and Entertainment and Devices president Robbie Bach repeated the "three screens plus the cloud" story that Microsoft has been pitching for a while, although they concentrated on the PC and TV screens, brushing past Windows Mobile with a demo of the already-launched HTC HD2, the usual vague hint from Ballmer about bringing "the Zune music and video service to other Microsoft platforms" and the promise of announcements at Mobile World Congress next month.
For the PC, the emphasis wasn't just on the success of Windows 7, although Ballmer produced some impressive stats about 50% increases in PC sales and 94% user satisfaction with Windows 7; it was about showing that the PC can compete with upstarts like ebook readers and instant-on smartbooks running Android.
"The quality, value and choice in Windows PCs simply can't be matched on any other platform," claimed Ballmer. "No matter what the source of the content, what kind of content, video, text, whatever, Windows PCs will absolutely offer the greatest variety and the most interesting content and entertainment experiences in the world."
"There's lots of cool things out there," admitted Ryan Asdourian, a senior program manager for the Windows team; "there's Kindle, there's Sony, there's Nook – but all of this can be done on your PC". He showed off the Graphic.ly digital comic book reader software and the Blio reader, with a million books in the store (including interactive textbooks) and Ballmer gave a sneak preview of a an HP slate PC running the Kindle software. (The slate isn't the Courier prototype that got so much attention last year but HP CTO Phil McKinney confirmed to us that it is a real product that will be launching this year).
When Ballmer says "we're talking about something that's almost as portable as a phone, and as powerful as a PC, running Windows 7," the obvious comparison is to devices like the Lenovo Skylight and the 'proof of concept' Android netbook HP will show in the Qualcomm keynote (both running on Qualcomm's Snapdragon platform) or the Entourage dual-screen e-reader (which has a second Android-powered screen for watching video and browsing the web).
He also showed the Dell Adamo XPS waking from sleep fast enough to draw applause – and fast startup is one of the major advantages claimed for alternative platforms. PCs can be that small and light, is the Microsoft message; they can start up that quickly – and they can run all your familiar apps.
Similarly as Sony and Samsung and others announce internet streaming and premium video services directly to TVs (and the PlayStation), Microsoft demonstrated sophisticated home entertainment developments like version 2.0 of Microsoft's Media Room IPTV offering and Xbox offerings that will ship in 2010, from the next version of Halo to Project Natal.
Blue skies for research
Both Media Room 2.0, which lets you take programmes from IPTV services like BT Vision and view them on a PC, Xbox or mobile device and the latest Bing maps, with Silverlight-enabled transitions that zoom from map view to satellite imagery to 3D street scenes with optional weather effects like snow, are good examples of what Microsoft means by 'plus cloud'.
As Ballmer put it, "We believe in an approach that combines the power of immersive and intelligent software that runs on devices along with smart and intuitive services accessed instantly through the cloud".
But like Project Natal and the touch interface for the HP slate, they're also perfect examples of Microsoft's secret weapon – Microsoft Research.
For years Microsoft has been spending a significant proportion of its budget on a wide range of research (and collaboration with universities and other research centres). The Photosynth technology behind the 3D environments on Bing Maps that let you explore places in detail comes from MSR, as does everything in Project Natal except the 3D camera (which was developed by an Israeli startup Microsoft bought last year).
"This is why we send the Neil Armstrongs of our company, our world-class engineers, psychologists, ethnographers, physicists, chemists, vision specialists, and design gurus to the farthest realms of the sci-fi world," said Bach; "to think and apply rigorous science to computer vision, machine learning, user interfaces and language processing."
Being able to control your Xbox by moving your body is the culmination of 20 years of research and over a thousand patents on digital ink, speech, touch and air gestures (Natal draws on the touch features in Windows 7, Zune HD and Surface – another Microsoft Research project). Most of the technologies Microsoft Research works on don't see the light of day for five to ten years or more, but this is where the products that really differentiate Microsoft come from.
In the past, Microsoft has come up with fascinating technologies in research that haven't made it out of the lab – or that haven't really made an impact when they have. But more and more, Microsoft is turning research into successful features and products.
As Ballmer spent the first half of the keynote demonstrating, Windows 7 has done a lot to reinvent the PC, but Microsoft is still dependant on PC and device manufacturers and software developers to take advantage of the platform it's built. The technologies that come out of Microsoft Research may give the company a little more control over its own destiny.
And of everything Ballmer and Bach showed in the keynote, including the HP slate and the preview of Halo Reach, it was Project Natal that drew by far the most applause.