Microsoft is preparing to open new retail stores in Mission Viejo, California, and Scottsdale, Arizona, the company said this week. Both will be in malls, and the California store will be near a store run by Microsoft's archrival Apple, which has been selling iPhones so fast it can barely keep up with demand.

Microsoft's stores are expected to sell laptops and maybe mobile devices, software, Zune media players and the Xbox 360 and are intended to make customers associate Microsoft with entertainment rather than software for businesses.

The last time the company tried this strategy, it flopped. In 1999, Microsoft opened "microsoftSF," an 8,500-square-foot store in San Francisco's Metreon, an upscale shopping center and entertainment complex by Moscone Center.

San Francisco was then at the heart of the dot-com bubble, and Moscone was host to many big technology conferences (including Apple's annual Worldwide Developers Conference) . The microsoftSF shop was divided into 12 "lifestyle areas" so customers could see how computers and software could be used for work and play. Two years later, the store closed.

Apple, on the other hand, now has over 250 retail locations, including one in San Francisco's high end shopping district around Union Square.

This time is supposed to be different for Microsoft. In February, the company hired an executive who's worked at Wal-Mart and DreamWorks, David Porter, as corporate vice president of Retail Stores. It has also been running a new series of television ads. A campaign last year featuring comedian Jerry Seinfeld and Microsoft Chairman Bill Gates fell flat.

Plans for the new Microsoft stores leaked last week on several blogs -- they are said to feature a big screen that wraps around the stores' walls and lots of hands-on demonstration areas. Stores by AT&T, Sony, Nike, Nokia, and Apple were all tagged as inspirations. A Microsoft store might even host your birthday party -- for a fee.

But Microsoft spokesman Frank Shaw told the blog Gizmodo that these were all "early prototypes."

"No final decisions have been made," he wrote. "As we previously announced, we are on track to open retail stores this Fall."

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