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Over the last few years one could easily say that Google had lost their way. They were no longer known for search. Somehow they’d turned into a company that acquired a series of nonsensical entities, launched half baked products that eventually hit the dead pool or just got into some really weird shit.

But last year that all started to change as the company announced that it would focus on its core products. Hindsight always being 20/20 it all makes sense. It’s like anything else, really. Spitball as many ideas as you possibly can just to see what sticks. And so whether it was by design or not, Project Glass is the future of Google. Not as a product that will make them billions of dollars but what it means for Google as a company and its future.

“The charter of Google X is to take bold risks and push the edges of technology beyond what they’ve been to where the future might be,” Sergey Brin told a small group of reporters duing demo of Project Glass. “We want you to be less of a slave to your devices. It’s been really liberating and I’m really excited to share it with all of you.”

Brin noted that Project Glass is what Google believes could be the next form factor of computing. As it stands now, many of us are willingly beholden to our smartphones with all the web browsing, twittering, pathing, instagramming and whatever else consuming most of our time. Human interaction has all but faded away. The fact that people play the “stacking game” is comical and cute but a sign of how infatuated we are with technology. Glass has the potential to buck that trend by “keeping people in the moment,” said Steve Lee, Product Manager for Glass. Brin also mentioned that Glass shouldn’t be used to fill idle time or to browse the web and that your phone or tablet perfectly fits those needs.

Dorky as they might look, Glass signals the first glimpse of how to integrate such invasive and important technology into our lives in a more seamless way. Isabelle Olsson, the industrial design guru on the team, says the design of Glass ensures “you can look into people’s eyes.” During my brief time with Sergey’s Glass, I can say that the display didn’t hinder my ability to see or look around. The display disappeared until I needed to see what was being shown. I might never have to pull my phone out again to reply to a text, get directions or snap a photo. So, yeah, I’ll deal with looking like a dork but don’t be surprised to see Glass integrated with existing glasses. Brin did mention that Google has been in talks with eyeglass makers and the like.

While the hardware is still in prototype phase, I overheard Brin say that he’s experienced up to six hours of juice off a single charge. But that can and will likely change based on usage (uploading photos, capturing video, etc.). Photos, for instance, will be stored locally and can by synced with the cloud later. Both Lee and Brin said that they’re working hard to optimize what data is being transmitted and stored both on the device and in the cloud to alleviate any battery woes. There may be settings that allow users to control the content being shared until you’re within reach of Wi-Fi or when you’ve plugged in your Glasses for the night. Babak Parviz, a contributor to Project Glass, said a previous build allowed him to query a voice search for the capital of China broadening his own knowledge base to everything that’s available on the Web.

I asked what actually worked on Glass now and Brin politely skirted the question by saying that they’re testing and implementing various features with each build to see what sticks. Facial recognition, while discussed and experimented with, doesn’t sound like it’s been compelling enough that the team wants to immediately integrate it.

Here’s what you won’t see in Glass: advertising. Brin stated pretty vehemently that they have no plans to integrate advertising into Glass and that the only plan is to simply sell the hardware, which will be “significantly” cheaper than the $1,500 Explorer Editions that were announced today. The Glass team says they’re focused on the quality of the experience and not making it as cheap as possible. (Thank gawd.)

Core Google apps like Gmail and Plus (Hangouts) are being tested now along with Android apps. What isn’t clear is whether or not the Android and Google apps teams are working with the team at Glass and vice versa.

So what was the reason for today’s announcement of the $1,500 Explorer Edition of Project Glass? It’s actually a slight pivot from what they’ve done in the past. For once, the typical Google way of pushing out half-done products might work to their advantage. Parviz, Lee and Brin emphasized how important it will be to involve the developer community to further push the platform before Glass becomes available to consumers some time next year. Speaking of ship dates, Brin says the consumer version will ship within a year of when the Explorer Editions ship. Developers will have access to a cloud-based API that is “pretty far along.”

Does this mean Google wants to compete with Microsoft or Apple toe-to-toe? No. Google will always be the weird kid in the corner who sporadically does something mindblowing. They’re not thinking about what’s going on now but what might happen in the distant future. Everything they’ve done up until now seems like a tiny spec of something larger and greater. The late Ray Bradbury said it best: “Life is trying things to see if they work.” And that appears to be what Google is doing.

(Reuters) - Facebook fired back on Tuesday in its legal battle with Yahoo by accusing the Web pioneer of infringing 10 of Facebook's patents, according to a court filing.

The counterclaim from Facebook, filed in a San Francisco federal court, comes after Yahoo a sued Facebook for patent infringement last month.

The dueling claims mark an expanding web of patent litigation that has already caught up the smartphone and tablet sectors and high-tech stalwarts such as Apple Inc, Microsoft Corp and Motorola Mobility Holdings Inc.

Yahoo's lawsuit against Facebook came at a delicate time, as the world's largest Internet social networking service is preparing for an initial public offering that could value the company at up to $100 billion.

Observers have said that companies are usually more vulnerable to patent suits when they are in the IPO process, as investors scrutinize the risks involved in the business.

But Facebook's counterclaim comes as Yahoo addresses its own challenges: the Web pioneer has seen declining revenue, and newly installed Chief Executive Scott Thompson is facing a contentious proxy fight with activist hedge fund Third Point.

Yahoo spokesman Eric Berman said Facebook's counterclaim is "nothing more than a cynical attempt to distract from the weakness of its defense."

Five of the patents asserted by Facebook target features related to Yahoo's online advertising business, which Facebook pegged at 80 percent of Yahoo's 2011 revenue, according to the counterclaim.

Yahoo's Flickr photo sharing service infringed various Facebook patents involving the ability to connect with other users on the online service, to identify people in a photo and to generate personalized news feeds, according to the filing.

At least one of the patents asserted by Facebook -- a method for tagging digital media -- lists its chief executive, Mark Zuckerberg, as one of the inventors, according to a U.S. government database.

Facebook General Counsel Ted Ullyot said the company had indicated that it would defend itself vigorously in the face of Yahoo's lawsuit.

"While we are asserting patent claims of our own, we do so in response to Yahoo's short-sighted decision to attack one of its partners and prioritize litigation over innovation," Ullyot said in a statement.

Yahoo has claimed Facebook infringed 10 of Yahoo's patents, including several that cover online advertising technology. In its lawsuit, Yahoo said Facebook was considered "one of the worst performing sites for advertising" prior to adapting Yahoo's ideas.

The case in U.S. District Court, Northern District of California is Yahoo Inc. v. Facebook Inc., 12-cv-1212.

Yahoo shares fell 2.4 percent to $15.09 in afternoon trading on Tuesday.

Most people don't like Internet Explorer. In fact, most internet users (i.e., all of us) think that it sucks! We all know it, and now Microsoft has officially admitted this fact.

So for the launch of IE9, and in a bid to make a comeback against Firefox and Chrome, Microsoft is confronting that criticism head-on with a hefty dose of humor.

Its new website, browseryoulovedtohate.com, shows that the brand doesn't take itself too seriously; the only buttons on the site read “Curious?”, ”It’s Good” and “No, really.” The site also hosts a hilarious video about a former IE-hater who goes to extreme lengths to stop people from using the browser. "The only thing it is good for at all is downloading other browsers," he insists.

There is also a series of infographics that show comebacks of other products in pop culture, including the mustache, PBR, and homebrewing. (It's almost as if Microsoft believes IE is so square that hipsters will use it just for the irony value.)

According to ComputerWorld.com, Internet Explorer holds 41.7 percent of global average user share, while Firefox's share is 26.8 percent, and Chrome's share is 23.6 percent. The large share can be attributed to Internet Explorer being the browser installed with the Microsoft operating system, but share has been declining for some time.

(Reuters) - Microsoft Corp released an incomplete version of Windows 8 for the public to download and try out on Wednesday, looking to rev up excitement for the slick, new-look operating system that it hopes will restore its fading tech supremacy.

Windows 8, as the first Microsoft operating system compatible with low-power microprocessors designed by ARM Holdings Plc, will run on tablets as well as desktops and laptops, in an effort to counter the runaway success of Apple Inc's iPad.

"It's an even better Windows than Windows 7," said Steven Sinofsky, head of Microsoft's flagship Windows unit, as he demonstrated the new system at the Mobile World Congress in Barcelona.

Windows 7, Microsoft's last operating system, was its fastest-selling ever, racking up 525 million sales in less than three years. But Microsoft has found itself sidelined in the rush toward mobile computing by Apple, Google Inc and Amazon.com Inc.

"It's incredibly fast and fluid to just navigate this UI (user interface)", said Sinofsky, showing off Windows 8 on a tablet and an ultra-thin laptop at the event in Barcelona.

Anyone can download the new version of Windows, but it will only work on PCs and laptops running standard Intel Corp x86 chips. Consumers will have to wait longer to try out the full experience on ARM-compatible tablets.

It is available for download at preview.windows.com.

Sinofsky said people from 70 countries had already downloaded the software on Wednesday morning, but he did not give exact numbers.

Microsoft says it is aiming to get machines running on both the ARM and Intel platforms into the market at the same time, but has not set a target date. The world's largest software company generally tries to bring out a new version of Windows every three years, so that would indicate a full release date around October this year, in time for the holiday shopping season.

In both versions, Windows 8 features a completely new interface, borrowed from what Microsoft calls the "Metro" style of the current Windows Phone software. It features blocks or "tiles" that can be moved around the screen or tapped to go straight into an application.

The latest version of Windows 8 unveiled on Wednesday has better performance, quality and reliability than the version it released to developers last autumn.

For the first time, this version of Windows 8 includes the Windows Store, where users can download and try out apps and get access to cloud storage with the ability to move content across a range of devices including Windows phones. It also uses a test version of Microsoft's newest browser, Internet Explorer 10.

The Windows Store has a range of apps including a reader for Gannett Co Inc's national newspaper USA Today, games such as Cut the Rope, and other titles compatible with Microsoft's Xbox video game system. But it is still tiny in comparison with the 140,000 apps available for the iPad. Users need to sign on with a Microsoft account to download apps, which are all free during the test period.

The test version of Windows 8 has mail, calendar and messaging apps, but no evidence of Office, Microsoft's dominant suite of work applications. Sinofsky said earlier this month that a version of Office would be included in Windows 8 for ARM tablets.

Microsoft's shares fluctuated on the Nasdaq, but briefly hit a new four-year high of $32.00 in early trading. The shares were down 17 cents at $31.70 in afternoon trading.

(Reuters) - Yahoo Inc co-founder Jerry Yang has quit the company he started in 1995, appeasing shareholders who had blasted the Internet pioneer for pursuing an ineffective personal vision and impeding investment deals that could have transformed the struggling company.

Yang's abrupt departure comes two weeks after Yahoo appointed Scott Thompson its new CEO, with a mandate to return the once-leading Internet portal to the heights it enjoyed in the 1990s.

Wall Street views the exit of "Chief Yahoo" Yang as smoothing the way for a major infusion of cash from private equity, or a deal to sell off much of its 40 percent slice of China's Alibaba, unlocking value for shareholders.

"Everyone is going to assume this means a deal is more likely with the Asia counterparts," Macquarie analyst Ben Schacter said. "The perception among shareholders was Jerry was more focused on trying to rebuild Yahoo than necessarily on maximizing near-term shareholder value.

"It certainly seems things are coming to a head as far as realizing the value of these assets."

Yang, who is severing all formal ties with the company by resigning all positions including his seat on the board of directors, has come under fire for his handling of company affairs dating back to an aborted sale to Microsoft in 2008.

Yang's exit comes roughly a month before dissident shareholders can nominate rival directors to Yahoo's board.

The remaining nine members of Yahoo's board, which includes Hewlett-Packard executive Vyomesh Joshi and private investor Gary Wilson, are all up for reelection this year.

Yang's departure could be part of a broader board shakeup, said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which owns Yahoo shares.

"If they don't move quickly on these things, they run the risk of a proxy battle and they are doing everything they can to avoid that."

The company did not say where Yang was headed or why he had suddenly resigned. CEO Thompson offered few clues in a memo to employees obtained by Reuters following the announcement.

"I am grateful for the support and warm welcome Jerry provided me in my early days here. His insights and perspective were invaluable, helping me to dig deeper, more quickly than I could have on my own, into some of the key elements of the company and how it operates.

Yang and co-founder David Filo, both of whom carried the official title "Chief Yahoo," own sizable stakes in the company. Yang owns 3.69 percent of Yahoo's outstanding shares, while Filo owns 6 percent as of April and May 2011.

In a letter to Yahoo's chairman of the board, Yang said he was leaving to pursue "other interests outside of Yahoo" and was "enthusiastic" about Thompson as the choice to helm the company.

Yang, 43, is also resigning from the boards of Yahoo Japan and Alibaba Group Holdings.

Respected in the industry as one of the founding figures of the Web, Yang has come under fire over the years from investors and to some extent within the company's internal ranks.

"Lots of people think he holds up innovation there with old ideas and (is) slow to decide and that he's not an innovator himself for being at such a high level," said one former Yahoo employee.

"People have very high expectations for founders. Everyone wants a Steve Jobs," the employee said, referring to Apple's co-founder who brought the company back from near death and transformed it into the world's most valuable tech company.

Some analysts say the Yahoo board's indecision stems in part from Yang's sway in the company. Disillusioned by the company's flip-flopping, they warn that the rest of the board remained much the same as the one that rejected Microsoft's unsolicited takeover bid when Yang was CEO.

"Jerry Yang was certainly an impediment toward anything happening," said Morningstar analyst Rick Summer. "This is a company that's been mired by a bunch of competing interests going in different directions. It was never clear what this board's direction has been."

Microsoft's bid was worth about $44 billion. Its share price was subsequently pummeled by the global financial crisis and its current market value stands at about $20 billion.

More recently, Yang and Yahoo chairman Roy Bostock have incurred the wrath of some major Yahoo shareholders for their handling of the "strategic review" the company was pursuing, in which discussions have included the possibility of being sold, taken private or broken up.

Yang's efforts to seek a minority investment in Yahoo from private equity firms enraged several large shareholders, including hedge fund Third Point, which accused Yang of pursuing a deal that was in "his best personal interests" but not aligned with shareholders' interests.

Yahoo has also been exploring a deal to unload most of its prized Asian assets in a complex deal involving Alibaba, valued at roughly $17 billion, sources told Reuters last month.

Alibaba Group's founder, Jack Ma, whose personal relationship with Yang led to Yahoo buying a 40 percent stake in Alibaba in 2005, said he looked forward to continuing a "constructive relationship" with Yahoo.

Susquehanna analyst Herman Leung said: "I had thought that Jerry Yang was a lifer at Yahoo.

"Without him on the board, this could smooth a potential transaction. What that transaction is, is any of our guesses right now."

(Reuters) - The world's biggest technology trade show will feature razor-thin laptops, powerful new smartphones and fancy flat-screen TVs, but talk in the cavernous halls of the Consumer Electronics Show, which kicks off on Monday night, may focus on whether the show itself has a long-term future.

Apple Inc, which has set the agenda in consumer electronics for the past decade, does not even attend the show. Microsoft Corp, desperately trying to catch up, is making this show its last. It has been a few years since Las Vegas-based CES had the "wow" factor.

"There's a lot of hype. The promise exceeds the deliverable a lot," said Todd Lowenstein, portfolio manager at HighMark Capital Management, which owns several technology stocks. "I take an interest in it only to the extent that there's market-moving information that comes out of there, which I find is rare."

Steve Jobs' stylish and dramatic product launches came to dominate the popular tech world, and rivals are looking to copy that outside of the hubbub and razzmatazz of CES in Las Vegas.

"A lot of companies are trying to imitate Apple's success in a lot of areas, and one area where Apple has been extremely successful is in controlling its message by controlling the event and the timetable of its announcements," said Avi Greengart, research director for consumer devices at Current Analysis, a business intelligence firm.

Microsoft, which is trying to win back its technology crown from Apple and newcomer Google Inc, has long said that CES in early January does not fit its product release timetable, meaning it has little new to share in the opening keynote, which has for years been given by Chief Executive Steve Ballmer, and before him by co-founder Bill Gates.

"Microsoft can do this on their own, they don't need CES," said Hanson Hosein, a specialist in technology and media at the University of Washington in Seattle. "It's a lot of money. These shows are generally declining in popularity anyway."

WHAT'S NEW?

This year, the buzzwords look similar to last year, including "connected," "always on" and "voice recognition," whether in new, more powerful phones and tablets or in cars or even watches.

"This year there's going to be a focus on connectivity and mobility that continues the momentum we've seen for the past few years, even though we may not see quite so many big announcements by (mobile) carriers as we did last year," said Ross Rubin, executive director, Connected Intelligence, at retail research firm NPD Group.

The latest crop of light and thin laptops, which Intel Corp has dubbed "Ultrabooks," is set to dominate the hardware displays, from the likes of Toshiba Corp, Asustek Computer Inc and Lenovo Group Ltd.

On the other side of the floor, the latest high-definition, Internet-enabled TVs from Sony Corp, Panasonic Corp, Sharp Corp and LG Corp will also draw crowds.

Wireless carriers AT&T Inc and Verizon Wireless are expected to unveil devices to take advantage of their new high-speed networks, and phone-maker Nokia is preparing to reintroduce itself to a U.S. audience with new handsets running Microsoft's latest Windows software.

Tablets may take a backseat after dominating the show last year, as hardware makers lick their wounds after failure to match Apple's all-conquering iPad.

Some suspect tablet makers are not fully committing to Google's Android as a tablet platform, knowing that Microsoft's tablet-friendly Windows 8 system is likely set to hit the market in the next 12 months. Microsoft showed off a flashy Samsung Electronics tablet running a prototype of Windows 8 in September, and more up-to-date demo versions are expected to be circulating at CES.

Somewhere in between the phone and tablet is the "phablet," the tag applied to Samsung's new 5.3 inch- (13.5 cm-) screen Galaxy Note.

So far available only in Europe and Asia, there is talk that AT&T will announce plans to launch the Android-based device in the United States at CES.

Sensor-laden, low-power devices with a constant connection to the Internet -- whether a phone, or smaller device hidden in your car or on your wrist -- will be the theme of the show, tech-watchers seem to agree. That allows users to move digital content around or get real-time feedback on where they are and what they are doing.

"The CPU is in your pocket, the data is all in the cloud," said John Elliott, senior executive at consulting firm Accenture's Mobility practice.

STILL HEAVING

CES, which started in 1967 in New York, was the launchpad for the VCR, camcorder, DVD, HDTV and many other pivotal home tech developments. It grew rapidly in importance after the COMDEX tech show folded a decade ago.

It has been a while since CES showcased such game-changing inventions, but it is still popular with technology exhibitors and buyers, although it may suffer a dip in overall attendance this year.

The 2012 International CES -- to state its full title -- is set to be the second-biggest on record, with more than 2,700 exhibitors taking up over 1.8 million square feet of show floor. The largest-ever CES was in 2008, with 1.85 million square feet of paid-for exhibition space.

The organizers said they are expecting 140,000 to 150,000 attendees this year, but acknowledge it will be tough to beat last year's 149,000.

Exhibitors tend to make reservations on next year's space while at the show, or shortly afterward, so CES will soon find out if its waning influence, or hard economic times, will take a bite out of next year's show.

CES is "a good opportunity to discuss the Intel products and technologies that consumers want to hear about," said Robert Manetta, a spokesman for the world's biggest chip maker.

The show is also still popular with smaller companies looking for a big stage to show off their wares.

"CES is hands-down the best venue to debut cutting-edge hardware and software to the world," said Michel Tombroff, CEO of Softkinetic, a Belgian firm which designs motion-sensing technology for controlling TVs and computers with your hands.

Technology buyers also like it.

"We are always looking for new, new, new," said a buyer at an upscale retailer focusing on teens. "For electronics, we wouldn't even bother with anywhere else."

Ultimately, CES still sets the pace in technology for retailers, said Rubin at NPD.

"CES has become the place where the expectations for the year are set in terms of the state of the art."

Jan 4 (Reuters) - Yahoo named PayPal President Scott Thompson as its chief executive on Wednesday, hoping the well-regarded Internet technology and e-commerce expert will replicate his success at eBay Inc and turn around the struggling company.

Thompson, credited with driving growth at eBay's online payments division PayPal, joins Yahoo during a period of turmoil, as the company plows ahead with a strategic review in which discussions have included the possibility of being sold, taken private or broken up.

Shares of Yahoo were down about 2 percent in mid-morning trading, as Wall Street assessed how Thompson's hiring would affect the hopes of some investors that Yahoo would be sold or spin off its Asian assets, as well as how Thompson's background fits in with Yahoo's core online media business.

"It's a positive outcome, but not as positive as a sale of the company," said Lawrence Haverty, a fund manager with GAMCO investors, which owns Yahoo shares.

"The risk element is that his background was in payments. And this is not a payment company; it's a marketing, technology company," he said.

Thompson, a former Visa payments software platform designer, joins the company four months after the firing of previous CEO Carol Bartz as the one-time Web powerhouse Yahoo struggles to compete with newer heavyweights Google Inc and Facebook.

"I'm from Boston, we're the underdogs since the beginning of time. Hopefully that spirit has held through. I like doing complicated, very difficult, very challenging things," Thompson said in an interview.

Thompson, who takes over on January 9, will also join Yahoo's board. He ran eBay's PayPal since early 2008, and was previously its chief technology officer. Under his leadership, Yahoo said PayPal increased its user base from 50 million to more than 104 million active users. PayPal processed $29 billion in payments in the third quarter of 2011.

EBay's shares fell 3.5 percent as analysts said the online retailer would miss the respected Internet executive.

EBay Chief Executive John Donahoe told staff in an internal memo that Thompson's move was a "shock."

"Scott informed me Tuesday afternoon, saying that despite his passion for PayPal, this was an opportunity he felt he had to take," Donahoe said.

At PayPal, Thompson was known as a leader who was not afraid to make bold strategic bets. He came up with the idea of taking PayPal beyond its online stronghold and into the physical world by allowing PayPal payments in retail stores -- an opportunity analysts believe could prove much bigger than its existing business.

That kind of strategic risk-talking could be particularly useful at Yahoo. The Sunnyvale, California-based company, whose services include mail, search, news and photo-sharing, was a Web pioneer that grew rapidly in the 1990s. But in recent years, Yahoo has struggled to maintain its relevance and advertising revenue in the face of competition from rivals Google and Facebook.

"They really need that push to the next level," said Ryan Jacob, chairman and chief investment officer of Jacob Funds, which includes the Jacob Internet Fund and counts Yahoo as one of its largest positions.

"Ideally what they would do is rather than just follow where today's Internet leaders are moving, try to really be on that front edge," he said, citing Yahoo's need be better positioned in mobile, social networking and other fast-growing technology trends.

During a conference call on Wednesday, Thompson cited mobile as a key area that he expected to focus on at Yahoo, and he said he viewed the company's treasure trove data about its users as one of Yahoo's key assets. But he said it was too early to comment on his overall vision for the company.

Yahoo Chairman Roy Bostock told analysts on the joint conference call with Thompson that Yahoo has no intention of being taken private.

Bostock also said Thompson would not be distracted by decisions related to the Asian assets.

Yahoo recently has been discussing slashing its stakes in China's Alibaba Group and its Japanese affiliate as part of a share deal worth about $17 billion, according to sources familiar with the situation.

Alibaba has also hired a Washington lobbying firm in a sign that the Chinese e-commerce company would be willing to make a bid for all of Yahoo in the event that talks to unwind their Asian partnership fail.

Several Yahoo investors said they believed the plans to spin off the Asian assets would remain on track with Thompson at the helm.

"If they can successfully complete the Asian asset transactions, in a way that is beneficial to Yahoo shareholders, I think it will buy them some time and they'll have a chance to build for growth," said Jacob, of the Jacob Funds.

"The sale of the Asian assets is what happens first and what happens afterwards is just a question of how they deploy the cash they get from the sale," said Jordan Rohan, an analyst at Stifel Nicolaus.

In 2008, Yahoo rejected an unsolicited takeover bid from Microsoft worth about $44 billion. Its share price was subsequently pummeled during the global financial crisis and its current market value is about $20 billion.

Co-founder Jerry Yang stepped down in late 2008 after being severely criticized by investors for his handling of the bid. The company cut thousands of jobs and later agreed to an advertising and search partnership with Microsoft.

Thompson said in an interview that Yahoo was in a strong position with its large user base of more than 700 million people.

"The traffic itself that these sites generate is a very big number, the collection of assets that sit below this core business I think are not well understood and clearly have tremendous opportunity to be leveraged as we look forward to the future."

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Windows-based tablets haven’t been treated kindly by the test of time. Those released in the Windows XP era relied on wonky, stylus-based data entry, and even modern, touch-based tablets running Windows 7 are poor performers.

Indeed, Microsoft has a troubled tablet history that the public isn’t soon to forget. This November, Forrester released a study that showed consumer interest in a Windows-based tablet dropped significantly this year. At the start of 2011, 46 percent of potential tablet owners wanted a Windows device. By Q3, that number slipped to 25 percent.

Forrester’s report stated, “Windows 8 hasn’t entered the consciousness of tablet buyers yet.”

That’s a shame because Gadget Lab has seen a Windows 8 tablet in action, and the experience opened our eyes to just how useful — and, yes, even fun — a Windows 8 tablet might be. Sure, Microsoft was demoing a mere reference design, but what we saw was so intriguing, we’re legitimately excited to see final, shipping products.

Windows 8 is being developed from the ground up to elegantly run on both traditional computers (desktops and notebooks) as well as touch-based tablets. The OS can run on either ARM or x86 processors, though apps written specifically for the x86 desktop environment won’t be able to run on ARM-based mobile devices.

Is this a terrible handicap? No, not based on what we’ve seen. Windows 8 tablets will run an updated version of the Metro UI found on Windows Phones, and the UI appears to transfer remarkably well to larger touch screens. You’ll get that same fun, friendly and animated “Live Tile” home screen found on Windows Phones, but with (theoretically) much more processing power to drive more powerful apps.

Windows 8 will go beta in February, which would peg a full software release around June 2012. Everything we’ve seen thus far suggests that Microsoft has really taken the time to develop a platform that will succeed on tablets, without abandoning the company’s PC roots.

Still a skeptic? You should be. Windows tablet wanna-haves have been burnt before. But please consider these four reasons why Microsoft’s upcoming push into the tablet space may surprise everyone by ultimately proving successful.

Microsoft Has a Chance to ‘Think Different’

“If Windows is to have any hope, its product strategists must not only bring new features to the platform but also must fundamentally reinvent the experience,” analysts J.P. Gownder and Sarah Rotman Epps say in the Forrester report.

Many current upstart tablets are just iPad copycats. They share essentially the same UI (multiple pages of identically sized home screen icons), they operate with nearly identical touch gestures, and they basically look the same. But by being such a relative latecomer to the modern tablet party, Microsoft has a great opportunity to look at what’s not being done, what can be done better, and what can be done differently.

And all this observation can inform a better Windows 8 tablet. Take, for example, Windows 8’s ability to switch from a tablet UI to a desktop UI. This could be a winning innovation.

“We are reaching a point where ARM platforms can deliver us desktop experiences in mobile form factors,” mobile developer Kelly Sommers told Wired.com. If this is true, and if Windows 8 tablets in desktop mode can overcome the performance issues that plagued Windows 7-based tablets, Microsoft might strike gold by delivering two operational environments for the price of one.

“In my opinion, the ideal user experience allows both [a desktop UI and touch-based UI], but not at the same time,” Sommers told Wired.com. “What if you dock your tablet, and it becomes a desktop experience on your monitor, with keyboard and mouse, for non-power uses? Undock your tablet, and it transitions to a tablet experience.”

Indeed, who wouldn’t want a dual-OS device that can serve as both a casual tablet, and as a no-excuses productivity computer? Neither Apple nor the Android contingent have answered this very real consumer problem.

Windows Phone Mango Shows Microsoft Can Do Mobile Well

Microsoft had a rocky start entering the mobile space, but has finally found its footing with Windows Phone 7 (and in Mango, Windows Phone 7.5, in particular). Consumers aren’t flocking to Windows’ new mobile OS like they are to iOS or Android, but if you haven’t gotten a chance to try it out, you should — it’s very well done. For a first-hand look, open up http://aka.ms/wpdemo in your mobile browser to give it a whirl.

“I think that what Microsoft learned with Windows Phone will carry over and influence Windows 8,” Display Search analyst Richard Shim says.

Microsoft is working hard to reach out to developers and provide support, marketing guidance, and app visibility through programs like BizSpark and Mobile Acceleration Week to fill out its still meager app offerings. These programs are by all accounts successful, so we can expect that Microsoft will continue them for Windows 8.

Indeed, if Windows 8 is as well-executed as Windows Phone Mango, it will be a positive experience for users. That’s something most Android tablets can’t claim.

And therein lies a very powerful strong point for Microsoft: The Windows Phone platform may not have a copious catalog of apps, or even that many adoptees, but most everyone who actually uses a Windows Phone enjoys the essential OS experience. So, if Windows 8 tablets can somehow get a foothold among vocal opinion leaders, consumer adoption could self-perpetuate as users evangelize the tablets on Microsoft’s behalf.

Windows Could Provide a Consistent Computing Experience

“I think that ultimately what users are looking for is for their computing experience to follow them around,” Shim says. “Creating a consistent UI across devices is the first step.”

It’s not exactly clear whether all Windows 8 experiences will be able to deliver on Shim’s vision described above, but if any platform has a chance to execute this, it will likely be Microsoft’s. Google doesn’t have a desktop environment to speak of (unless you include browser-based apps), and Apple’s iOS and Mac OS X environments are cleanly split with no easy paths to unification.

But Windows 8 will be a cloud-powered experience through Windows Live SkyDrive. As a result, data, apps and settings will be synced across Windows 8 devices using your Microsoft account. Much like what iCloud is striving to accomplish with a more unified iOS experience, SkyDrive will similarly do for Windows 8.

“A truly consistent experience across every Microsoft device is something new to the space,” Resolve Market Research analyst Randy Hellman says.

So how will this work? Well, first it’s important to note that Metro apps (i.e., Windows 8 tablet apps) are HTML5-based, and will therefore work in any environment — on x86 and ARM devices, on tablets, laptops and full-fledged PCs. This alone provides a windfall for users seeking a harmonious computing experience.

It remains to be seen whether current Windows Phone apps will run on Windows 8 tablets; Microsoft hasn’t officially commented on that possibility. Nonetheless, by using HTML5 as a bridge between tablets and computers, Microsoft has a distinct advantage. For the broad swath of software that HTML5 can support, users should be able to appreciate seamless integration.

Microsoft Will Offer Differentiated, But Not Fragmented, Options

For Windows Phone, Microsoft provides a list of mandatory specs in order to ensure a quality experience across all Windows Phone devices. Microsoft will likely implement the same policy for its Windows 8 tablet devices.

Android, by comparison, lets manufacturers (and carriers) essentially do whatever they want with both software and hardware. This has led to some serious fragmentation issues ranging from OS version incompatibility to inconsistent home button placement. Even the popular Kindle Fire tablet is a huge departure from other Android tablets, with its own Amazon-centric UI.

“Windows 8 tablets will come in different sizes and different orientations, and have different battery lives depending on their capabilities,” Microsoft representative Christopher Flores told Wired.

But fragmentation? “Never software fragmentation,” Flores said. Former Windows Phone 7 GM Charlie Kindel wrote in a recent blog post that Android “enables too much fragmentation“, which “will eventually drive end users nuts.”

This means Windows 8 could become a refreshing, consistent, easy-to-use alternative purchase for anyone not interested in an iPad, whether for philosophical or financial reasons.

Of course, there’s still much we don’t know about Microsoft’s tablet initiative, and all of the what-if’ing above goes out the window once we have real hardware to evaluate.

But Microsoft definitely has the potential to deliver, and from what we’ve seen of Windows 8 tablets so far, the future is promising. Could a Windows 8 tablet be the focus of Microsoft’s final CES keynote? We’re excited as anyone to find out.