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Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times reporter Sharon Chan.

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January 6, 2009 9:36 PM

CES: Netbook maker Asus partnering closely with Microsoft on Windows 7, but showing new Eee PCs with XP

Posted by Benjamin J. Romano

LAS VEGAS -- The netbook market exploded in 2008 with significant implications for Microsoft's flagship Windows business. The Consumer Electronics Association says in 2008 manufacturers shipped 10 million of these low-cost, lightweight computers meant for Web surfing, e-mail and other light-weight, connected activities.

One of the leaders in the market is ASUSTeK Computer, the Taiwan-based global computer hardware giant, whose Eee PC line helped kick-start the trend. Today the company rolled out the latest in that line, as well as several other new hardware devices, and highlighted its relationship with Microsoft.

Dave Fester, general manager of marketing in Microsoft's OEM division, gave a brief presentation showing "Windows 7 Ultimate" running on an Eee PC. The machine featured an Intel Atom processor and 1 gigabyte of RAM.

"Microsoft is partnering very deeply [with Asus] on our future offerings of Windows," Fester said. "We'll be talking about it some tomorrow night with Steve Ballmer."

He showed the machine switching rapidly to standby mode and then coming back on in a matter of seconds. This kind of shut down and start up performance has been an emphasis for Microsoft with Windows 7.

"Now you haven't seen Windows run that fast ever before," Fester said.

Fester also had the Windows Live Essentials suite of online services, including instant messaging, loaded onto the Eee PC and conducted a video chat with a colleague in the audience at the packed press conference.

But other, newer entrants to the Asus Eee PC line were shown running on Windows XP Home, the operating system that preceded Microsoft's current offering, Windows Vista.

Last April, Microsoft extended the availability of the basic version of Windows XP for use on netbooks until June 30, 2010. The move helped the company fend off competition from open source Linux, which powered nearly all of the netbooks sold in late 2007, when they first emerged on the market.

The diminutive netbooks loomed large during Microsoft's last quarterly earnings report. Analysts were concerned by sluggish Windows growth, which saw sales increase 2 percent to $4.2 billion, 4 percentage points lower than company forecasts. The unexpected growth of netbooks, which typically run lower-end and less profitable versions of Windows, was cited by executives as one reason for the slower growth. The company reports earnings for its fiscal second quarter on Jan. 22.

Asus showed the new Eee PC T91, a netbook with an 8.9-inch touch-sensing screen, a swiveling monitor that allows it to convert to a Tablet PC, and, in the demonstration Tuesday, Windows XP Home.

"It's the superset of the original Tablet PC," said Jonney Shih, Asus chairman and CEO.

The device can act as a digital photo frame, a GPS navigation system, a game console and a juicer. (OK, not a juicer. I don't think.)

The company also expanded its line with an Eee Top, which Shih described as an Internet appliance for areas of the home like an entryway or kitchen. It has a gesture navigation system, "soft stylus" handwriting recognition, an Opera Web browser optimized for touch controls and, you guessed, it was shown running Windows XP Home.

PC Magazine has good coverage of the rest of the Asus announcements.

Lot's of companies are rolling out new offerings in the netbook category at CES. We'll bring you more details about this category, which the CEA expects to hit 18 million units in 2009.

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