SEATTLE - Shares of Microsoft Corp. fell Wednesday after the software maker delayed the consumer release of its new operating system until January 2007, after the holiday shopping season.
Shares of Microsoft dropped 59 cents, or 2.1 percent, to close at $27.15 on the Nasdaq Stock Market.
The Redmond, Wash.-based company made the announcement about its new system, dubbed Vista, after financial markets closed on Tuesday. Analysts said the delay would hurt computer makers and retailers most of all, since they were likely looking forward to a new operating system to boost holiday sales.
THE ISSUE: Microsoft Corp. won't have the consumer version of its new operating system, Windows Vista, ready by the crucial holiday selling-season.
THE DELAY: The company says tweaks to the system's security functions have built several extra weeks into the product's expected completion. And that makes it too late for many PC makers and retailers to be ready for the 2006 holiday season.
WHAT NEXT?: Large corporate clients will get some versions of the new system in November, but consumers can expect a huge launch for Vista in January.
"It's a much bigger deal for the computer makers than it is for anybody else," said David Smith, a vice president with Gartner Inc.
Windows Vista is Microsoft's first major update to the company's flagship operating system since Windows XP was released in late 2001, meaning partners will be left with a fifth major holiday season without a new version of the operating system to promote sales.
"It's not the optimal situation, to be launching the next-generation version of Windows right after the big holiday sales season," said analyst Joe Wilcox with Jupiter Research.
A spokesman for Dell Inc. declined to comment on how the delay might affect sales. Shares of Dell rose 14 cents, to close at $30.41 in Nasdaq trading. In a statement released by Microsoft, Hewlett-Packard Co. said it supported Microsoft's decision to make "quality" a priority in scheduling the operating system's release. Shares of HP fell 18 cents, to finish at $33.36 on the New York Stock Exchange.
Microsoft will release some versions of the new operating system for big businesses in November as planned, but the consumer version will be postponed until January, said Jim Allchin, co-president of the Microsoft division that includes Windows.
Wilcox said releasing the system in November to businesses would likely help Microsoft _ since its business sales are highly profitable _ while the delay in the consumer release would be most harmful to its partners.
"You can play semantics and say that the operating system is shipping in 2006, but if consumers can't buy it until 2007, PC manufacturers don't have it to sell to them," Wilcox said. "This blow falls on the partners."
Allchin said the decision to delay the Vista release came after Microsoft realized that Vista would be completed several weeks later than originally planned, largely because of efforts to improve security in the new system. Microsoft's Windows operating system has been an immensely popular target of Internet attackers, leading to a major companywide initiative to improve security in all its products.
That delay was enough for some retailers, computer makers and other corporate partners to say they would have trouble preparing for the holiday season. Allchin said troubling factors included the time it takes to literally get computers from overseas manufacturers onto store shelves.
"The fact is that we wanted everybody in the industry to be ready for this," Allchin told journalists and analysts in a conference call.
In an interview, Allchin said he suspects some computer makers may give consumers who buy a new PC during the holidays a way to easily upgrade once Vista becomes available. But he said he couldn't predict how the delay might affect holiday season computer sales.
Analyst Matt Rosoff with independent research firm Directions on Microsoft said he suspects computer makers are likely displeased with the situation, but with Microsoft's strangle hold on the operating system market they have little control over it.
"Certainly PC makers aren't going to be happy about it, but I don't know exactly what they're going to do. They'll wait," he said. "There's not a whole lot of choice at this point."