Microsoft's Gates, Ballmer Talk Up New OS

SAN FRANCISCO -- Little more than a year after the release of its Vista operating system, Microsoft (MSFT Quote) executives offered a peek at its replacement Tuesday evening.

In a wide-ranging discussion at the annual D6 meeting, hosted in Carlsbad, Calif., by The Wall Street Journal, which reported the proceedings on its All Things Digital Web site, Microsoft Chairman Bill Gates and Chief Executive Steve Ballmer acknowledged public dissatisfaction with Vista before demonstrating the user interface for Windows 7, which is expected in late 2009 at the earliest.

The executives also repeated previous disclosures regarding their deal talks with Yahoo!(YHOO Quote), without shedding any light on where the process stands.

The partial unveiling of Windows 7 comes at a sensitive time. The Redmond, Wash., software company is working hard to move corporations onto the new system, while fighting a stream of criticism and pleas for Microsoft to continue selling its previous XP system until Windows 7 is ready. The client division -- primarily Windows PC software -- recently reported revenue of $12.5 billion for the first three quarters of the company's fiscal year, up 12% from the same period of fiscal 2007.

"Vista is not a failure," Ballmer said, according to the allthingsd.com Web site. "Is it something that with 20/20 hindsight we'd do differently? Sure." The chief consumer complaint about Vista is that Microsoft altered the Windows user interface, he added.

When asked if Vista has damaged the Windows brand, Gates, who in July will step back from daily involvement in the company, said Vista has given Microsoft the opportunity to improve on the system -- a company goal with all of its software.