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Is Windows 8 the PC's Best Chance to Stay Relevant?

Here's what makes Windows 8 so important: It might be the PC's best chance to maintain its dominance in computing.

Source: Microsoft.com

Microsoft, the software juggernaut that built its empire in the PC era, finds itself in an unusual position: underdog. Today, as it launches its most ambitious piece of software since the PC became a household staple, its Windows software has to share the spotlight with a new iPad from Apple, a new phone from Samsung, and a yet-to-be-determined gadget from Google.

On its face it's unfair, really. Microsoft has radically redesigned the software that runs the world's computers, adding colorful tiles, a slick touch interface, even building its own tablet to show what Windows 8 can do. (Read More: Everything You Need to Know About Windows 8.)

But the change comes at a time when PC sales are in retreat; the latest numbers from research firm IDC show unit shipment volumes dropping 8.6 percent in the third quarter compared to last year. Meanwhile, Apple most quarters is selling iPads as quickly as it can make them. (Read More: Apple Earnings to Sway Sentiment in a Nervous Market.)

That's what brought me to Redmond, Wash., on a rainy October day a week ago to see Steve Ballmer. Microsoft's CEO has an outsized presence and an unquenchable optimism about Microsoft's prospects. When I asked him about the PC market's alarming stumble in the third quarter, he said he believes a lot of it owes to people waiting for Windows 8. (Read More: Why Most Companies Won't Be Early Adopters of Windows 8.)

Perhaps. But Ballmer also knows the game has changed in computing, and he's been retooling Microsoft's approach in a way he hopes will bring momentum back. In his words, from our interview:

"Well, I think there are three things that are really important to us. Number one, it's clear that the cloud as a delivery point is becoming sort of the de facto design point for a lot of software. And so when we talk about a move to a world of devices and services, in some senses what we're encapsulating is this world in which things get delivered, from data, information, applications, comes from the Internet cloud. That's number one.

"Number two, we're living in a world in which there is a lot of innovation going on in the hardware form-factor and the software that provides the user interface to it. People will talk about touch, or voice, or a variety of other modalities. Or even the kinds of devices we're doing with Windows 8 that are notebooks and desktops and tablets, all off of one common base of applications and experiences.

"And we want to make sure that we are guiding and driving innovation across that hardware software boundary. ... We feel like we've got to be part of driving the — this hardware software innovation boundary. That's the second key principle in this move to devices and services.

"And then the third thing is I think what the consumer thinks they're buying is different today than it was any time in the past. The consumer buys a device and the enterprise buys a service. Software may be our core capability. But the purchase decision gets to be the device or the service. And we want to make sure that we're participating in that fully."

Bottom line: Big changes are coming for Microsoft ... and it all kicks off today.

—By CNBC's Jon Fortt

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