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Gates to unveil new Windows CE

Microsoft's chief executive will show off new software, dubbed Pocket PC, for handhelds during a keynote at a trade show tomorrow night, sources say.

Microsoft chief executive Bill Gates will unveil his firm's newest software for handhelds during a keynote at a trade show tomorrow night, sources said, in one of the most visible attempts at repositioning the faltering operating system.

Gates will demonstrate the long-awaited update to Windows CE in his speech at the Consumer Electronics Show in Las Vegas. Code-named Rapier, sources close to the company said the newest version of the scaled-down operating system will be launched under a new name: Pocket PC.

Microsoft declined to comment.

Microsoft will also announce the latest version of Auto PC, sources said, the company's technology to bring the Internet and multimedia entertainment to cars.

The announcements would be in step with the CEO's style, as he typically uses his keynote speeches to unveil new technology. At last year's Comdex trade show, he showed off the MSN Web Companion, a scaled-down device designed purely for Internet use.

In addition to new features--such as the capability to read electronic books on the palm-size devices and support for Windows Media Player--the launch of Pocket PC is another example of the company's ongoing efforts to break the Windows CE losing streak. Despite Microsoft's marketing heft and predictions that its arrival into the handheld market would decimate rivals, Windows CE has failed to gain much momentum.

Since its release, users have complained about Windows CE's interface, and manufacturers such as Philips, Everex and LG Electronics have discontinued their devices. Overall sales of CE devices have been disappointing, garnering all Microsoft manufacturers around 10 percent of the market, according to a recent report from International Data Corp. (IDC). Meanwhile, rival Palm has maintained its near 70 percent market share, worldwide, and gained attention with its high-profile licensees like Sony, Nokia and Handspring.

But Microsoft has never faltered in its public or financial commitment to Windows CE, seen as the company's best chance to lay the groundwork to profit from the coming generation of wireless devices and services. Along those lines, executives confirmed last month that Windows CE devices will be re-launched this year under the moniker "Windows Powered," ostensibly playing up the resemblance between Windows CE and the company's better-known desktop operating systems. The Pocket PC name appears to be more of the same.

At CES, Microsoft is also expected to announce the availability of Microsoft Reader, an electronic book application with the company's ClearType technology, for the Pocket PC.

The new Pocket PC devices will include the Windows Media Player for the first time, and owners of existing handhelds with color displays from Casio, Hewlett-Packard and Compaq will be able to download the player, as well, by February, sources said.

The updated OS reportedly fixes many of the usability issues that have plagued Windows CE, such as cutting down on the number of steps needed to complete various tasks. Expected to be announced as early as last summer, the launch of the new software was rumored to be pushed back to appease manufacturer concerns about cannibalizing sales.

In addition, sources said Microsoft will announce that the second version of Auto PC--the specialized version of Windows CE for use in car computers--has been released to manufacturers. Visteon, a new manufacturer, and Clarion will be demonstrating their Auto PC systems at the trade show. The new systems will include larger displays, in-car entertainment options like DVD players and video games from Sega's Dreamcast and Nintendo and compatibility with popular cell phones.