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Can Windows 8 save Microsoft?

A reworked version of the operating system that made Microsoft king in the PC era is aimed at keeping pace with rivals in mobiles and tablets

Windows is dead; long live Windows. The proclamation would not be out of place at the home of Microsoft in Redmond, Washington, next week as the software giant unveils Windows 8, the latest incarnation of its operating system.

The one-time undisputed king of the technology world is gambling on a radical overhaul of its best-known product to reclaim the momentum from the likes of Apple and Google, its scrappy Californian rivals.

That the business needs a shot in the arm is widely acknowledged. There was a time not so long ago when the brotherhood of the order of the Start Menu reigned supreme. But the combination of tough economic conditions and rising tablet and smartphone sales have been eating into the PC market. This month the research firm IDC said that compared to last year, global PC sales had slumped by 8.6 per cent in the third quarter. And only days ago, Intel, the largest chip-maker, said it was slowing production in the face of the softness.

Microsoft's own results this week revealed revenues in the third quarter down 8 per cent, at $16bn (£10bn). And although this was exaggerated by the deferral of a large chunk of revenues that the company will regain as Windows 8 is launched, the figures were still below what analysts had pencilled in.

The reworked Windows is Redmond's answer to these challenges. As Daniel Ives, an analyst as FBR Capital Markets, told Reuters when the results came out, "all expectations are on the launch".

The system deliberately looks and feels different, as Microsoft, led by chief executive Steve Ballmer, sets its sight on the new, more portable devices such as the iPhone and the iPad that are making inroads into what was once the confirmed province of the PC.

In what has been hailed as the most radical redesign since Windows 95, the interface is geared towards touchscreens and tablets, with the company forgoing the humble Start Menu for a new console-style navigation system designed to exploit our growing fondness for finger taps, rather than mouse-clicks.

Behind the shiny exterior rests the new Windows Runtime Library, a programming interface that allows applications to be coded in a way that they run on both PCs and tablets, another nod to the shift in the way we use computers. Instead of relying on a single device, consumers are increasingly dividing their time across a variety, something that Microsoft is hoping to harness with the new platform.

"When the PC dominated personal computing by providing a single device for messaging, internet access, gaming and productivity, Windows was a powerhouse for Microsoft," said Michael Silver, an analyst at Gartner. "However, smartphones and tablets, led by the iPhone and iPad, have changed the way people work."

Appropriately, the Windows 8 launch on Friday next week will coincide with the release of Microsoft's answer to Apple's wildly successful tablet. The first version of Surface, which will run on Windows RT, a mobile operating system powered by an Arm chip, already appears to have garnered interest, with the company's online pre-order website for the least expensive version indicating yesterday that the first batch of the entry-level model, priced at $499, had already sold out, even though exact level of demand at this stage remains unclear. The company is also is planning to reveal its Windows 8 smartphone operating system soon after.

Its rivals are not being complacent. Apple has laid the groundwork for what is expected to be the launch of its new tablet, the iPad mini. The Cupertino-based firm has invited the world's press to an event next week, days ahead of the Microsoft launch, with everyone anticipating news of a smaller and cheaper 7- or 8-inch version of its popular device. Elsewhere, Samsung also has a new offering with the latest version of its Galaxy Note phone-cum-tablet device.

Tablets represent a key market for the big beasts of technology, with low-priced options increasingly gaining ground. Around 22 per cent of adults in the all-important US market already own a tablet, according to a Pew Research Centre study published this month. Just over half of these own an iPad, down from 81 per cent a year ago. Nearly half, the study said, now own devices based on the Android operating system, such as Google's Nexus.

The rapid shifts in market share highlight the opportunity for Microsoft, if it can play its cards right.

Part of that will arguably depend on more than the intricacies of software and hardware. As the buzz around the iPad mini shows, nifty marketing has been a key component of Apple's success. Time and time again, it manages to generate excitement, and anticipation, around its products.

To take it on at its own game, Microsoft appears to have spent large, with the campaign to promote the new Windows estimated to have cost upwards of $1bn. Although the company has not commented on the numbers, some put the figure as high as $1.8bn. The first US television ad flagging up Windows 8 was aired last weekend, with another blitz expected in coming days as we near the launch date.

The Obama campaign, in contrast, spent a mere $730m to secure the White House in 2008, according to the Washington-based Centre for Responsive Politics. Meanwhile, Apple, according to a disclosure made by firm's marketing chief Phil Schiller during an August courtroom appearance in the company's patent dispute with Samsung, has shelled out only $650m on pushing the iPhone, launched in 2007.

Microsoft's cash won't, then, guarantee success. The company no doubt knows this from many cheques its written in its battle with Google for the search engine crown. But this time round, the cash is backed with a radical shift. Mr Ballmer and his colleagues, as they bury the old Windows next week, must be praying that it works.

Screen test: How the hi-tech challengers are lining up

Microsoft Surface

Boasting a 10.6-inch display, the Surface running Windows RT, the ARM processor-friendly version of Microsoft's new operating system, is Redmond's opening gambit as it attempts to take on Apple's iPad and other tablets in what is a fast-growing and lucrative market. Out later this month, with prices starting at $499, it is expected to be followed soon by a beefed-up Intel-based version

Apple iPad Mini

As Microsoft looks to make inroads into the tablet market, Apple is expected to move to consolidate its position with the launch of a smaller, cheaper iPad expected next week. The buzz in the tech world points to a 7 or 8-inch display. The cost? If the rumours are correct, it could be priced as low as $250 when it is launched in the US.

Samsung Galaxy Note II

The latest version of Samsung's Android-based phone-cum-tablet – it is smaller than most tablets, but bigger than most phones, and combines the functionality of both – could face a challenge from the iPad Mini, though the reviews thus far have been positive.