Microsoft Corp has said that its next operating system will be made for touch-screen applications, an alternative to the computer mouse.

Microsoft Chief Executive Officer Steve Ballmer unveiled the iPhone-like touch-screen feature at The Wall Street Journal's "D: All Things Digital" conference, calling it "just the smallest snippet" of the Windows 7 operating system slated for release in late 2009.

A Microsoft employee showed possible applications like enlarging and shrinking photos and navigating a map of San Diego by stroking the screen.

Microsoft Chairman Bill Gates framed the new feature as an evolution away from the mouse.

"Today almost all the interaction is keyboard-mouse," Gates said. "Over years to come, the role of speech, vision, ink -- all of those -- will be huge."

Microsoft's top two executives defended the company's last operating system, Vista, while acknowledging missteps. Gates said he has never been 100 per cent satisfied with any Microsoft product, and that the company prides itself on fixing shortcomings in later versions.

"Vista has given more opportunity to exercise our culture than some products," he deadpanned.

The former Harvard University classmates fielded a range of questions for more than an hour, sharing the stage as Gates prepares to relinquish daily responsibilities at the company in July to focus more on philanthropic work.

Ballmer said Microsoft remained in discussions to team up with Yahoo Inc after Microsoft's USD47.5 billion bid for the company was spurned earlier this month. He said Microsoft was not planning to buy Yahoo but offered only the barest details of what he has in mind.