Daisuke Wakabayashi

SEATTLE: Microsoft Corp. said on Tuesday that it plans to delay the consumer launch of its much-anticipated Windows Vista until after this year's holiday shopping season, sending its shares down nearly three percent.

The world's largest software maker pushed back the consumer version of Vista until January 2007 from an earlier target for the second half of 2006 and pledged to ship the next version of its operating system to business customers in November.

Vista is the first major overhaul of Windows since Microsoft rolled out Windows XP nearly five years ago.

Microsoft had originally been expected to release Windows Longhorn, now Vista, in 2005. The company scaled back its ambitions and pushed it out to 2006 before this latest delay.

The eight- to 10-week delay, according to estimates by research firm Gartner Inc., may reverberate throughout the technology industry from PC manufacturers to chip makers and down the supply chain, analysts and investors said.

"It is a critical eight- to 10-weeks for retailing and for the producers. The retailers and PC hardware manufacturers work on razor-thin margins, so the impact there could be pretty severe," said David Smith, analyst at Gartner.

Investors, concerned about the impact of a Vista delay on PC sales, pushed down shares of chipmaker Intel Corp. and large PC manufacturers Hewlett-Packard Co. and Dell Inc. in after-hours trade.

Windows Vista is the headliner for a series of upcoming and recently released new products at the software giant, including its Xbox 360 next-generation game console and an upgrade to its popular Office business software.

The successful roll-out of those new products are vital to Microsoft reestablishing itself as a company with the robust growth potential to provide a kick-start for a largely stagnant stock over the last five years.

Windows, which is found in about 90 percent of all computer desktops, is Microsoft's biggest cash cow.

"We could have just gone ahead, but I didn't think it was the right thing to do," said Jim Allchin, co-president of the company's Platforms & Services Division. "We're setting stringent quality bars on what we do."

Microsoft said it delayed the new Windows to improve overall quality, particularly in security, and that PC makers didn't want the operating system introduced in the middle of holiday sales, because a new version would create instability in the market.

The delay also pertains to Vista loaded on new PCs.

Bells and whistles
In addition to beefed-up security, the new Windows offers a new interface with 3-D scrolling between different windows, which can appear translucent to allow users to see the information beneath.

It can also display and record high-definition television on the computer and allows the user to search for content within the PC and across the network.

Microsoft plans to conduct a consumer "beta", or test, of Windows Vista for two million users in the coming quarter.

Redmond, Washington-based Microsoft is planning six core offerings of the Vista operating system, targeting how people use computers instead of PC hardware specifications.

Three will be aimed at consumers, two at business users, and a stripped-down version for emerging markets. Unlike the current Windows XP, there will be no versions designed specifically for advanced 64-bit computing, multimedia computers or Tablet PCs.

Todd Lowenstein, a co-portfolio manager for HighMark Capital Management's Value Momentum Fund, said the delay is disappointing in the short-term, but his long-term view on the company remains bright.

"There is a host of new product offerings ... and we think that is going to generate good fundamentals and even better sentiment for the stock," said Lowenstein, who owns Microsoft within the fund.

Shares of Microsoft fell 2.56 percent to $27.03 on the Inet electronic brokerage. In regular Nasdaq trade, the stock fell 15 cents, or less than 1 percent, to close at $27.74.

(Additional reporting by Duncan Martell and Eric Auchard in San Francisco)

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