Does Microsoft have smaller tablets in its sights?

We've been hearing rumours and reports about it and although we've yet to actually see it, all signs suggest that Windows Blue is on its way.

Various tech sites picked up the news after Win8China reported this Windows 8 follow-up will have tighter integration with Microsoft's search engine, Bing. Some news sites claim that this version is a major upgrade to Microsoft's current operating system, which I partly believe. It appears, though, that Windows Blue is a modified version of Windows optimised for use on 7 to 11.1in screens. More specifically, I hear that it is a low cost version of Windows 8 designed specifically for use on 7 to 8.9in tablets.

A couple of weeks ago, I pointed out that dozens of low cost tablets will hit the market this year, making it likely that people will own several tablets for personal and business use. I also suggested that cheap tablets, mostly in the 7 to 8in range, should dominate the market going forward. The trouble is, to date, all of Microsoft's tablets are in the 10in range and the version of Windows 8 on these tablets cannot be scaled down for use on smaller screens.

Windows Blue has apparently been designed to fill this gap and should be priced low enough so that Windows Blue 7in and 8in tablets can sell for $199 to $349 (£130 to £230 in our money, but naturally, these devices will cost a bit more than that in the UK). If this is true, Microsoft could finally have a product competitive with tablets from Apple, Google, Samsung, and Amazon.

It is not too far-fetched to imagine that if Windows Blue can scale up for use on 11.1in screens, it could also run on some type of hybrid or clamshell offering in the lower end of the market. Think of this as netbook 2.0. I've heard that it could be used in an ultrathin, netbook-like device priced between $399 and $549 (£260 and £360), depending on if the clamshell has a touchscreen. At the lower price, I doubt it would have a touchscreen, but if it was a tablet with an attachable keyboard, it might have a touchscreen as part of the design and would most likely cost in the upper end of the aforementioned price range. Such an offering could potentially be out by the back-to-school season.

It sounds like Windows Blue will be low cost for OEMs – I hear vendors could buy it for about $30 (£20) as opposed to the $85 to $120 (£55 to £80) they now pay for Windows on traditional laptops and PCs. Most likely, it will emphasise Microsoft's Internet Explorer and Bing, along with dedicated Windows 8 apps. It is supposedly backward compatible with Windows apps and, most interestingly, is rumoured to include Office on any device that has a screen smaller than 10.1in, about the size of the screens on netbooks. That means the 11.1in clamshells with touchscreens would not make the cut. Still, their designs could be more like the 11in MacBook Air model and capture the attention of consumers who want a Windows Ultrabook but will not pay the price of the ones on the market today.

I suspect we will learn more about Windows Blue in the coming months, and if my leads are accurate, Microsoft might have a fighting chance in this burgeoning low-end tablet space as early as this autumn.

While cheap tablets will drive much of the slate growth, there is still big demand for robust tablets with multiple cameras, more memory, and faster processors in the $249 to $349 (£160 to £230) price range. Ultrathin touch-based clamshells in the $499 to $549 (£330 to £360) range could also become a hot product, even if they are more like a netbook than the full-blown Windows 8 laptops on the market today. This is because the Windows 8 app ecosystem is finally starting to grow, making such a device more appealing to the low-end consumer market. And of course, it would be able to run the tens of thousands Windows applications already on the market.