LAS VEGAS (TheStreet) -- There was no tablet-waving this year for Microsoft (MSFT) chief Steve Ballmer during his third annual speech to open the 2011 Consumer Electronics Show Wednesday evening. If anything, he should have held an Xbox or the popular sensor device, Kinect.

Unlike the unappreciated Windows Phone 7 or the terrific but obligatory Windows 7 PC system, at least the Kinect is a product people seem to be excited about. Ballmer announced that 8 million Kinect devices were sold in the two months after it was launched -- 3 million more than the company targeted.
Microsoft CEO Steven Ballmer

Looking ahead, Microsoft plans to introduce an Avatar Kinect product that lets friends connect through Xbox Live in a social network where virtual selves can interact. This would be not so much like the movie Avatar, but more like a cartoon version of you and your friends hanging out with Kinect interpreting your gestures, facial expressions and body movements.

The move into social networking through the Xbox is one of the few new avenues of growth that Microsoft has been able to create as rivals like Google ( GOOG), Apple ( AAPL) and Facebook outpace the software giant.

Windows Phone 7 has had a troublingly weak inception. The company's big, bold re-entry into mobile devices was met with very tepid demand this fall. As TheStreet reported, 40,000 Windows 7 phones were sold on opening weekend, marking a disappointing beginning to a crucial part of the business.

Ballmer offered no sales numbers, but said that more than 20,000 application developers have signed on with Windows Phone 7 and that there are 5,000 apps available for the platform. CDMA versions of the Windows 7 phones will be arriving at Sprint ( S) and Verizon ( VZ) in the first half of the year, just in time to go head to head with Apple's Verizon iPhone.

In the computer software front, Microsoft showcased a few devices running Windows 7 including Hewlett-Packard ( HPQ) notebooks powered by new Intel chips. The company also showed a Samsung tablet that has a sliding keyboard to make the device double as a notebook. But perhaps most intriguing was the Acer dual touchscreen tablet, which is shaped like a book and incredibly similar to the Courier device Microsoft promised and later killed last year.

A new version of Surface, Microsoft's large touchscreen table top, was introduced. The 4-inch thick panel is now thin enough to stand upright or hang on a wall. It still remains to be seen where or in what setting this device will ever succeed.

Ending his presentation on a very forward-looking note, Ballmer demonstrated several notebooks that were running a future version of Windows on a "system-on-a-chip," or ARM ( ARMH) processors. This is a big departure from the Intel ( INTC) chip franchise so dear to Microsoft's PC history. By the looks of the wires and silicon exposed on developer's models of the devices, it could be the guts of something Ballmer may wave at the crowd during his next CES keynote.

--Written by Scott Moritz in Las Vegas.

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