Microsoft drops 'Blue' name, confirms Windows 8.1 update will be free

Microsoft also announced a name for the update: Windows 8.1.

Not charging extra for Windows 8.1 is consistent with the company's practice of offering "decimal point" updates to operating systems for free. However, when Microsoft Corp. announced the update last week, it didn't say that it would be free. The company also hadn't disclosed the system's formal name, leaving open the possibility that it would be a larger update, perhaps to Windows 9. The update had been known simply by its code name, Blue.

Tami Reller, the marketing and financial chief for Microsoft's Windows business, said the company wants to assure customers that they can buy Windows 8 now and still get the benefits of Windows 8.1 later.

Microsoft overhauled its operating system with the release of Windows 8 in October. The changes are meant to address the growing popularity of smartphones and tablet devices, which are siphoning sales from desktops and laptops - traditional strongholds for Microsoft. The company designed Windows 8 to work with touch-screen controls popular on mobile devices, while also allowing people to use mouse and keyboard commands.

However, Windows 8 has confused a lot of users. Gone is the familiar start button that gave people quick access to programs and settings. To change settings, people must pull out a drawer of icons from the side, using a different maneuver depending on whether the control is through touch or a mouse. Windows 8 offers a new start screen filled with tiles that link to frequently used programs, but some programs work only in a desktop mode that resemble older versions of Windows - but without the start button. Windows 8 doesn't let people automatically start in that desktop mode.

(Also see: 5 common Windows 8 gripes and their possible solutions)

One leading research firm, International Data Corp., said Windows 8 contributed to a 14 percent decline in worldwide PC sales during the first three months of the year - the biggest year-over-year drop ever.

Reller offered few details about Windows 8.1, but she reiterated that it will be better suited for smaller, less expensive tablets with 7- and 8-inch display screens. That could allow Windows 8 devices to compete with Apple's iPad Mini and similar-size tablets from Amazon.com Inc., Samsung Electronics Co. and Google Inc.

Reller said the company will make it easy for consumers to get the update from the start screen. She said the company also hopes some devices will have Windows 8.1 already installed by the time the update is ready. The company didn't offer a specific date, but the update is expected in time for the holiday season. Microsoft plans to make a preview version available next month for anyone to download.

Microsoft said it has sold more than 100 million Windows 8 licenses so far. Most of those are to PC makers such as Hewlett-Packard Co. and Dell Inc. to ship with new machines sold to individuals and businesses. Microsoft also sold upgrades from previous versions. Current prices start at $120, though some customers had been eligible for $15 upgrades.

Microsoft, which has its headquarters in Redmond, Wash., made the announcement at JP Morgan's Technology, Media and Telecom Conference in Boston on Tuesday. Microsoft's stock rose 45 cents, or 1.4 percent, to $33.25 in midday trading Tuesday.