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Microsoft CEO Steve Ballmer speaks at the launch event of Windows 8 operating system in New York, October 25, 2012.LUCAS JACKSON/Reuters

Microsoft Corp. launched its new Windows 8 operating system and Surface tablet on Thursday in a bid to revive interest in its flagship product and regain ground lost to Apple Inc. and Google Inc. in mobile computing.

"We've reimagined Windows and we've reimagined the whole PC industry," Microsoft chief executive officer Steve Ballmer told Reuters Television.

Windows 8 devices and the company's new Surface tablet, which aims to challenge Apple's popular iPad head on, go on sale at midnight on Thursday.

Steven Sinofsky, head of Microsoft's Windows unit and the driving force behind Windows 8, opened the launch event in New York in front about 1,000 media and PC industry partners.

He showed off Windows 8's new touch-optimized design, but emphasized that the system was built upon the base of Windows 7, Microsoft's best-selling software that recently passed 670 million licence sales.

While Windows 7 was introduced three years ago, Windows 8 represents the biggest change in Microsoft's user interface since Windows 95 came out 17 years ago.

The radical redesign, which dispenses with the Start button and features square tiles for apps, may surprise some users. Initial demand for Windows 8 appeared solid, but customers were wary.

"We've seen steady pre-order sales on Windows 8 devices from early adopters," said Merle McIntosh, senior vice-president of product management at online electronics retailer Newegg. "However, we expect that most average consumers are waiting until after launch to make a purchase decision."

Microsoft is offering several versions of Windows 8. The basic Windows 8, the full Windows 8 Pro and Windows 8 Enterprise for large organizations will all run on the traditional PCs, laptops and new tablets using Intel Corp. chips.

Through the end of January, users running Windows XP, Windows Vista or Windows 7 can download an upgrade to Windows 8 Pro for $40 (U.S.).

For the first time, Microsoft has also created a version called Windows RT which will be pre-installed on its Surface tablet and other devices using low-power chips designed by ARM Holdings.

Early reviews of the Surface tablet, which starts at $499, have been mixed, with praise for its slick hardware, but concerns about battery life and limited software and applications available.

Microsoft has not said how many apps Windows 8 will have at launch, but it is expected to be a fraction of the 275,000 available to iPad users. The New York Times Co announced a reader app for Windows 8 on Thursday, and Inc. launched a Kindle e-book app for the new system, but some big names such as Facebook Inc. are not expected to feature.

Investors were uncertain about the prospects for success of Windows 8, but many feel a solid launch could help Microsoft's stock, which has languished between $20 and $30 for much of the last decade.

Apple's shares have significantly outperformed Microsoft's over the past 10 years, and its market value is now more than double Microsoft's. Microsoft shares were up 0.3 per cent at $27.99 on Thursday afternoon, while Apple shares were down 0.8 per cent at $611.70.

"This really is about debunking the notion that Microsoft is a dinosaur and they are relevant in a new climate of tablets and mobile," said Todd Lowenstein, portfolio manager at HighMark Capital Management, which holds Microsoft shares.

"Extreme pessimism and almost utter failure is priced into the shares, so any kind of positive delivery on units, customer perception, would be really beneficial to the stock."