* Windows 8, Surface tablet on sale at midnight
* CEO Ballmer sees Windows 8 recasting PC industry
* Windows 7 has sold 670 mln licenses-exec
By Nicola Leske
NEW YORK, Oct 25 (Reuters) - Microsoft Corp launched its new Windows 8 operating system and Surface tablet on Thursday in a bid to revive interest in its flagship product and regain ground lost to Apple Inc and Google Inc in mobile computing.
"We've reimagined Windows and we've reimagined the whole PC industry," Microsoft Chief Executive Steve Ballmer told Reuters Television early Thursday ahead of the launch.
Windows 8 devices and the company's new Surface tablet, which aims to challenge Apple's popular iPad head on, go on sale at midnight on Thursday.
Steven Sinofsky, head of Microsoft's Windows unit and the driving force behind Windows 8, opened the launch event in New York in front about 1,000 media and PC industry partners.
He showed off Windows 8's new look, but stressed that the system was built upon the base of Windows 7, Microsoft's best-selling software that recently passed 670 million license sales.
The new design of Windows, which dispenses with the Start button and features square tiles for apps, may surprise some users. Initial demand appeared solid, but customers were wary.
Early reviews of the Surface tablet were mixed, with praise for its slick hardware, but concerns about battery life and limited software and applications available.
"We've seen steady pre-order sales on Windows 8 devices from early adopters," said Merle McIntosh, senior vice president of product management at online electronics retailer Newegg. "However, we expect that most average consumers are waiting until after launch to make a purchase decision."
Investors were uncertain about the prospects for success of Windows 8, but many feel a solid launch could help Microsoft's stock, which has languished between $20 and $30 for much of the last decade.
Apple's shares have significantly outperformed Microsoft's over the past 10 years, and its market value is now more than double Microsoft's. Microsoft was little changed at $27.87; Apple fell 0.7 percent at $612.73.
"This really is about debunking the notion that Microsoft is a dinosaur and they are relevant in a new climate of tablets and mobile," said Todd Lowenstein, portfolio manager at HighMark Capital Management, which holds Microsoft shares.
"Extreme pessimism and almost utter failure is priced into the shares, so any kind of positive delivery on units, customer perception, would be really beneficial to the stock."