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Microsoft Delays Consumer Release of Windows Vista

The Redmond giant missing delivery by the holiday shopping season may benefit other parts of the consumer electronics industry, say analysts.

(Seattle) Microsoft Corp. said Tuesday that it will not release the consumer version of its new Windows operating system until January 2007, after previously saying it hoped to release the software in time for the holiday season.

Windows Vista is Microsoft first major update to the company's flagship operating system since Windows XP was released in late 2001.

The company will release some versions of the new operating system for big businesses by November as planned, but the consumer version would be held until January, said Jim Allchin, co-president of the Microsoft division that includes Windows.

Allchin said the decision to delay the release came after Microsoft realized that Vista would be completed several weeks later than originally planned, in large part because of efforts to improve security in the new system.

That was enough for some retailers, computer makers and other corporate partners to say they would have trouble preparing for the holiday season.

"The fact is that we wanted everybody in the industry to be ready for this," Allchin told journalists and analysts in a conference call.

Windows Vista's delay is a blow to companies that make and sell computers, but perhaps good news for others in the electronics industry.

Analysts say consumers who were considering buying a new PC this holiday season may now opt for a fancy new television, a rival Apple computer or even Microsoft's own Xbox 360 videogame console, giving an unexpected boost to companies that make those products.

"Every holiday season there are the top five hot items, and one of those items this year would've been a Windows Vista PC," said Samir Bhavnani, a principal analyst with Current Analysis. "Now that's off the list and it leaves room for, maybe, a wide-screen television."

Redmond-based Microsoft said late Tuesday that it had decided to withhold the release of the consumer version of Windows Vista until January, after computer makers and others complained that Microsoft setbacks were making it tough for them to adequately prepare for a holiday sales push.

Microsoft still plans to release Vista in November to large, business customers that buy Windows licenses in bulk, but the product won't be on store shelves _ and inside consumers' computers -- until the new year.

Vista is the first new version of Microsoft's flagship operating system since Windows XP was released in 2001.

Companies that make computers and their components were counting on it to breathe excitement into PC sales efforts this holiday season. The loss is expected to extend across the supply chain, from the companies that make computer chips to those responsible for shipping the computers.

"The entire stack gets hurt," said Roger Kay of Endpoint Technologies Associates.

Some of the lost holiday sales may be pushed into 2007, but others will disappear completely, Kay said, as some consumers splurge instead on a fancy cell phone, a music player or a videogame console.

Sony Corp., which recently delayed the release of its new PlayStation 3, still expects to have units available by the holidays and could find sales boosted. Microsoft's own Xbox 360 also could benefit, as could companies that make other big-ticket items, such as flat-screen televisions or the next generation of DVD players.

Apple Computer Inc., which is expected to offer new computers carrying its updated operating system in time for the holidays, has the potential to be one of the biggest winners if it can use the opportunity to persuade Windows users to switch allegiances, analysts say. But Apple currently has just a tiny percentage of the market, and it's not clear how many people will decide to jump.

"Apple definitely stands to gain," Bhavnani said. "The question is, to what degree."

Analyst Rob Enderle said Apple may have an unprecedented opportunity if, as some suspect, it introduces in time an entertainment-centric Mac that can do such tasks as recording live television.

Microsoft has been making inroads into the living room with its Windows XP Media Center Edition, and such entertainment functions are expected to be baked into one of the company's consumer versions of Vista.

Still, Microsoft faces competition from companies that make stand-alone digital television recorders, including TiVo Inc., Motorola Inc. and Scientific Atlanta Inc.

And if Apple can push that functionality into people's living rooms before Microsoft's Vista comes to market, Enderle said, it might score the kind of coup it did with the industry-leading iPod music player.

"They can come in and steal that segment," he said.

An Apple spokesman declined to comment.

For Microsoft itself, the delay is an embarrassment, but analysts still credit the company with making the announcement early in the year and avoiding a nasty surprise right before the holiday season begins.

Nevertheless, The Wall Street Journal reported in Wednesday editions that the company was considering a management shake-up in its Windows unit. A Microsoft spokesman declined to comment.

Microsoft shares fell 59 cents, or 2.1 percent, to close at $27.15 in trading Wednesday on the Nasdaq Stock Market.

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