Microsoft's Last CES KeynoteMicrosoft's Last CES Keynote

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Delivering what Microsoft has declared will be the company's final keynote address at the Consumer Electronics Show (CES), CEO Steve Ballmer enlisted celebrity Ryan Seacrest to engage him with genial questions about his company's products.

Prior to Seacrest's arrival on stage, Gary Shapiro, president and CEO of the Consumer Electronics Association, lauded Microsoft's many keynotes over the years and characterized the company's departure from CES as a pause, which is far from the divorce that Microsoft has suggested.

Ballmer appeared earlier in the day with Stephen Elop, CEO of Nokia and former president of Microsoft's business division, at the introduction of the Nokia Lumia 900, the first Nokia-made phone that works with AT&T’s 4G LTE network. Elop characterized the situation facing Microsoft and Nokia as a war of ecosystems. But if there's a war underway, it wasn't apparent from Ballmer's banter with Seacrest.

"We have a chance in the next year to really raise our game, to raise our product line to the next level," said Ballmer.

A heartfelt call-to-arms it was not. Rather, the focus was on the promise of Windows Phone and Windows 8, and the successes of products like XBox and Windows 7. Bing, the source of many quarters of online losses, didn't get much attention, but it has doubled its market share since launch, and with Yahoo accounts for some 30% of U.S. searches.

[ Find what's turning heads at CES. Read CES 2012 Preview: 16 Hot Gadgets. ]

Talk of revolution--a requirement at tech industry events--wasn't completely absent. An interactive version of Sesame Street that relied on Microsoft's Kinect motion-tracking technology was demonstrated. Ballmer announced that Kinect would be coming to Windows on February 1st.

"Just as Kinect revolutionized entertainment, we'll see it revolutionize other industries--education, health care, and more," he said.

If only the prospect of doctors gesturing at Kinect sensors seemed more like a revolution and less like hand-waving.

Ballmer didn't reach the frenzied state of enthusiasm he has come to be known for until the conclusion of his dialogue with Seacrest, but he did sound earnestly cheerful about the way things are going for Microsoft. "I'm really excited and upbeat about where we are," he said told Seacrest. "We definitely took a different approach than everybody else and I think we have a really beneficial experience."

Ballmer has to convince businesses and consumers that Microsoft can compete effectively with Apple and Google, which together have run away with the smartphone and tablet markets. The race no longer looks hopeless: Windows Phone devices have been well-received by reviewers, even if sales have yet to impress. And Windows 8, with its innovative Metro UI and ARM support, has piqued the interest of developers.

But Microsoft's departure from CES underscores the fact that the tech industry has been transformed by the shift toward mobile devices and that Microsoft is still shifting talent and resources to adapt.

"Things change, that's the essence of this industry," declared Ballmer.

The question is whether Microsoft is changing fast enough to keep pace. In 2010, Ballmer pitched a Windows-powered HP slate at CES and then watched as HP made a disastrous $1.2 billion bet on Palm and webOS. Ballmer returned to CES in 2011 to promote Windows 7 tablets, none of which could match Apple's iPad. Microsoft cannot afford to let Apple and Google lap the company again in 2012.

The good news for Microsoft is that Apple's and Google's efforts to cement customer loyalty with vertically integrated services provide a template that should work with Windows, which is used on some 500 million computers around the world. With Windows 8, Windows Phone, Xbox, and Kinect, and hardware partners that look ready to deliver actual products, 2012 could be a good year for Microsoft.

"There's nothing more important at Microsoft than Windows," Ballmer concluded. Ready to catch the Metro? Windows 8 is a major shift, with features borrowed from desktop gadgets and mobile devices, and it brings a slew of new paradigms for developers. Our report, IT Pro Impact: Windows Developer Road Map, shows you what you need to know. (Free registration required.)