Steve Ballmer's State of Microsoft Keynote at CES 2009

— -- Microsoft will release a public beta this week of its next desktop operating system, Windows 7, hoping it will address the problems that have made Windows Vista perhaps the least popular OS in its history.

As rumored, Microsoft CEO Steve Ballmer announced the availabilty of the Windows 7 beta during his speech tonight at the start of the 2009 Consumer Electronics Show in Las Vegas.

(Watch the Ballmer keynote video. Link opens Windows Media Player.)

It's Ballmer's first year giving the opening address, traditionally handled by former CEO Bill Gates. His blustery style is likely to contrast sharply with Gates' meek and thoughtful demeanor in years past.

Ballmer also announced several partnerships that could help widen the use of Microsoft's Windows Live online services and applications.

They include a deal with Dell to preload Windows Live Essentials and Live Search on all its PCs for consumers and small businesses starting in February, said Craig Beilinson, director of marketing for Microsoft's entertainment and devices division. Another deal will see Verizon preinstall Live Search on all its cell phones in the U.S. later in the first half of this year.

Microsoft's CEO also announced a new Netflix application for Windows Mobile, due later this month, that lets people order movies and update their queue from their phone, and a new version of the Windows Mobile browser.

One thing Ballmer will not do is unveil a Zune mobile phone, Beilinson said, as some rumors had suggested. Nor will he rebrand Live Search with a catchy new monicker--"Kumo"--to help it better compete with Google, as others had predicted.

Ballmer said the OS is now "feature complete" and a new beta will be available for the general public to try out on Friday. Microsoft will cap the beta after about the first 2.5 million downloads. Microsoft developers, including MSDN, TechNet and TechBeta subscribers, will be able to download the beta Wednesday night, two days earlier than the general public, Beilinson said.

The audience was treated to a demo of Windows 7's features by Microsoft's Charlotte Jones.

(You can find Microsoft's video demos from the keynote on their CES 2009 page.)

The minimum recommended hardware for the beta includes a 1GHz processor, 1GB of system memory, 16GB of available disk space and support for DX9 graphics with 128MB of memory (to enable the Aero theme), Microsoft said. The recommendations may change for the final product, it said.

Microsoft isn't updating its official ship date for Windows 7, which is still early 2010, though some pundits expect it to ship in time for the busy back to school season later this year.

Among the new things in Windows 7 are an updated interface, including a redesigned task bar; tools to make home networking simpler; and a reworking of the User Account Control feature, which annoyed many Vista users with its constant prompts. It also aims to give better performance than Vista and supports a touch-screen interface, though few PCs are likely to use that feature at first.

Ballmer said that there are now 100 million active Vista users, and that an additional 80 million licenses have been sold but not yet activated, many to corporations. Few would call Vista a great success, however. Poor performance on all but the most powerful PCs, a lack of backwards compatibility and some annoying interface features have caused many to stick with Windows XP and await Windows 7.

TechARP.com, a tech enthusiast Web site, reported earlier this week that Microsoft will offer free or discounted Windows 7 upgrades to people who buy a Vista PC after July 1. That news, which Microsoft has not confirmed, is a sign that the company plans to ensure Windows 7 can run on a broad range of today's PC hardware, said Matt Rosoff, an analyst with Directions on Microsoft.

"They are trying to focus on the fundamentals and make sure it runs well on today's hardware, rather than looking a couple of years ahead as they did with Vista," he said. He expects a further public beta before the final Windows 7 ships, though Microsoft wouldn't confirm that.

Windows Live

Also discussed was Windows Live Essentials, a set of hosted productivity applications, is now out of beta and available for broad use. Live Essentials includes applications like Windows Live Messenger, Live Mail, Live Writer and Live Photo Gallery.

In addition, a new deal with Facebook will include its status updates with the other social-networking applications on the Windows Live home page, which Microsoft is trying to make a hub for Internet users.

The partnerships with Dell, Verizon and Facebook are significant for Microsoft as it tries to compete better with Google, Rosoff said. "For Live Search in particular, it's an important way to get these services out to more people," he said.

Robbie Bach, head of Microsoft's entertainment division, touted strong sales of Microsoft's Xbox 360 and say there are now 17 million active members on Xbox live. He also updated the audience on the progress of the Microsoft Zune.

He called the Xbox Live "a showcase" for connected social entertainment.

Bach also discussed an easy-to-use game construction kit, called Kodu, that will allow every-day Xbox users to design their own games. Due in March, it will let people trade these games with other Xbox users, but not sell them for money. Bach invited a 12-year-old programmer named Sparrow to demo and edit her game live.

Bach also unveiled two new games in Microsoft's hugely popular Halo franchise, including Halo Wars, the first Halo game rated for a teen audience. It's available starting Feb. 28. A download will be available Feb. 5.

A new adult game, Halo 3 ODST, will launch later this year, he said.