Windows RT and Surface: Microsoft's big mistake?

(MoneyWatch) The new versions of Windows was supposed to change everything for Microsoft (MSFT). Windows RT would help lever the company into the burgeoning tablet market and bolster consumer interest in Windows-based smartphones. Some also expected Windows 8 to reinvigorate the flagging PC market, still one of Microsoft's profit mainstays.

So much for wishful thinking. Early results are disappointing for Microsoft. CEO Steve Ballmer characterized initial sales of the company's Surface tablet as "modest." And now comes word that Windows head Steve Sinofsky is out of the company and has already been replaced. 

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Microsoft is in a tough position, mostly of its own doing. By acting so late to revamp its mobile strategy, the company let Apple (AAPL) and Google (GOOG) grab practically the entire smartphone market, a segment in which Microsoft was once a major player. Then Apple jump-started the tablet market, and eventually tablets using Google's Android platform began to catch on. Meanwhile, Microsoft continued to fall behind, as people moved away from Windows-based computers and toward tablets and smartphones.

But even putting aside the expected grumblings about Windows 8, there are some serious issues. Microsoft has created a branding problem by using variations of the same name for the standard PC version of Windows and the RT variant that runs on tablets. Many people find the differences confusing, wrongly expecting that Windows RT should run normal Windows programs, when it actually only supports mobile applications.

Ordinarily, that wouldn't be much of a problem. After all, the iPad doesn't run the same software as a Mac. But Apple was clearer in its marketing strategy by calling its mobile platform iOS, while the company's desktops and laptops run Mac OS. Google also makes a distinction, using Android for phones and tablets but Chrome for its Chromebooks.

Then there are the more tangible problems for Microsoft's latest gear, like cracking keyboard covers and some reports of audio issues. Not that competing products don't have similar issues, such as iPhone 5 devices that came out of the box scuffed.

The difference is that Microsoft, not Apple or Google, is the company that must prove it can be a force in the mobile tech market. And the time for do-overs is fast running out.