Microsoft launches Vista version of Windows

By Daisuke Wakabayashi

NEW YORK  - Microsoft Corp. launched Windows Vista for businesses, unveiling the first major upgrade of its dominant operating system in five years and predicting that over 200 million people will run new Windows, Office or PC server software by the end of 2007.

Vista upgrades the operating system used on more than 90 percent of the world's computers and features translucent windows to make it easier to view items on the desktop, an improved search system, and improved reliability and security.

The world's largest software maker will not make Vista widely available for retail customers until Jan. 30, giving computer manufacturers time to load the operating system onto new PCs.

Plagued by a series of development delays, Windows Vista is the cornerstone of a new product cycle at Microsoft and a crucial litmus test for the company's ability to maintain its grip on desktop computer customers.

At the same time it faces fierce competition from Web rivals such as Google Inc., which is offering software-like Web services, and electronics makers such as Apple Computer Inc. and Sony Corp.. Apple's iPod music player and Sony's PlayStation video game console series dominate markets that Microsoft covets.

Along with Vista, the new Office 2007 software suite and Exchange server became available to business customers on Thursday.

"This is the biggest launch in our company's history. That's for sure," Chief Executive Steve Ballmer said at a presentation in New York.

Microsoft's Windows and Office business accounts for more than half of its sales and almost all of its profits, but even more importantly its steady cash flow allows the company to venture out into new business areas such as digital music players, game consoles and mobile phone software.

"It's a keystone of Microsoft's product launches going forward. It's pretty darn important that it performs well both in the marketplace and on your PC," said Kim Caughey, an analyst at Fort Pitt Capital, which manages more than $1 billion, of which less than 2 percent is in Microsoft stock.

MILLIONS IN MARKETING

Microsoft said it plans to spend "hundreds of millions" of dollars to market the Windows upgrade. The marketing budget will eclipse the $500 million Microsoft spent to market Windows XP, the predecessor to Windows Vista, Ballmer said.

In the first year of release, Vista will be installed on more than 100 million computers worldwide, according to research firm IDC. Nearly 60 percent of all new PCs in 2007 will run Vista, according to research group Gartner.

"We're going to have a quicker uptake on Vista and Office 2007 as a percentage of the installed based in business than we had on XP or Office 2003. I feel pretty good about that," Ballmer said in an interview following the presentation.

"Does that mean we will have 60 percent of business desktops converted in 12 months? No, it doesn't mean that."

Consumers buying the Vista software off the shelf will pay between $199 and $399 for versions ranging from basic to "ultimate", although new computers almost always come with a version of Windows installed and corporations tend to have massive licensing deals.

Among the changes in Office 2007 is a ribbon at the top of the screen that displays the most commonly used functions.

And one of Microsoft's main selling points to business customers is Vista's beefed-up security, including a feature that encrypts data aimed at preventing people from stealing information from lost or stolen laptops.

(Additional reporting by Scott Hillis in Seattle and Peter Henderson in Los Angeles)