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Microsoft, the largest and richest software company in the world, has to play catch-up in the exploding mobile device market presently dominated by Google’s Android operating system and Apple’s iOS for iPhones and iPads. But the first glimpses of programming code for the next version of Windows give some clues as to how Microsoft will try to deal with the mobile transition: by making its new PC operating system able to run on everything from smart phones to server clusters.

This is for good reason, because PC sales in the developed world are declining while smart phone and tablet computer sales—particularly for Apple—have been exploding. While Microsoft points out that it has sold 350 million Windows 7 licenses for PCs in the two years that the software has been available, nearly all of these are replacement licenses rather than ones for new customers. Windows Phone 7, Microsoft’s current mobile operating system, ranked a dismal fifth at the end of 2010, with 4.7 percent market share, according to the research firm Gartner. So embracing mobile is crucial for Microsoft, although Microsoft CEO Steve Ballmer also has called the next version of Windows Microsoft’s “riskiest yet.” The risk lies in Microsoft’s need to retain its share of desktops while simultaneously leaping the mobile divide, which it has never before tried to do with a single product.

The two alpha versions of Windows 8 (as the software is being called unofficially, at least) that people are now trading over the Internet date back to last year. One may well be the version shown by Ballmer at the International Consumer Electronics Show in January. They were shipped to hardware manufacturers to test on their computers only to be leaked to the public. And what we see feels remarkably like Snow Leopard, the most recent version of Apple’s operating system, right down to having an App Store.

Between features that are operational in the alpha version, referred to in the database within the Windows operating system known as the registry, and hinted at in comments the programmers left in the code, it appears that Windows 8 will have the ability to easily synchronize mobile devices with data stored in the cloud and will offer push notifications (a function borrowed from Windows Phone 7). It also promises a built-in PDF reader and an attractive new user interface with some elements borrowed from Windows Phone 7, too. Also hinted at in the code are effortless network connections to servers, printers and televisions, although such programmer comments are not yet accompanied by actual code and may not eventually appear. Microsoft declined to comment.

One feature that has been getting a lot of buzz from developers is Windows 8’s apparent ability to boot from a USB stick. The attraction of this is the idea, popularized in the Linux community, of carrying on your keychain your entire computing environment including an individually tuned operating system and all needed applications and files. Put the USB stick in any borrowed PC and you are in business, right where you left off on another PC. But given that USB-boot has also been a popular way to circumvent PC security systems, and that it seems to go against Microsoft’s Windows Live cloud strategy, this may be an alpha feature aimed solely at OEM hardware engineers and completely missing from the final product.

Most Microsoft product roadmaps show Windows 8 shipping to users in the fall of 2012 after entering a formal beta test at Microsoft’s Windows Developer Conference in September of this year.

Though Microsoft is the dominant supplier of desktop software, what happens if a lot of those desktops go away or are not upgraded? That’s the fear that underlies Windows 8, making it so important. It is at platform transitions like DOS to Windows or standalone to networked, where market leadership can change. Microsoft is placing a huge bet that this time it’ll get it right. The company’s recent deal with Nokia, bringing the huge Finnish phone vendor into the Windows Phone fold, is an important part of this strategy.

Microsoft and Nokia, now run by former Microsoft executive Stephen Elop, are taking a risk on each other. Nokia’s smart phones, based on its Symbian operating system, have fallen from first place in market share and continue to plummet, so the company is abandoning Symbian in favor of Microsoft’s Windows Phone. This will allow Nokia to dramatically cut jobs and research and development costs. But what if Microsoft’s Windows Phone version for Nokia is late or flawed? Microsoft, in turn, is accepting financial responsibility for Nokia’s software development, buying what it hopes will be big market share in the process. To be a major player in the mobile transition, Microsoft has to be the number one or two player rather than a distant fifth.

Robert X. Cringely has written about technology for 30 years. He is the author of Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date.

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Tagged: Computing, Google, Microsoft, software, mobile devices, Windows, windows 8

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