Microsoft pins its hopes on successful Vista launch

Executives from Microsoft and from across the personal computer industry are descending on New York today amid fanfare for the unveiling of the company's new Windows Vista operating system and Office business software - one of the most important set of product launches in the company's history.

The long-delayed upgrades to Microsoft's most important and profitable software go on sale to business today, and their reception will set the tone for the consumer launches scheduled for the end of January.

The company is fighting to replace earlier versions of Windows and Office, which together account for 90 per cent of its profits and underpin Microsoft's investment in a new generation of internet-based businesses, including its MSN websites and new Zune digital music player.

An estimated 90 million copies of Vista could be shipped in the first year, mainly to consumers buying new home PCs. Businesses may not start adopting it in numbers until 2008 at the earliest. It will take until 2010 before even a third of office computers are using Vista.

Steve Ballmer, Microsoft chief executive, will launch the products at the Nasdaq stock exchange. On hand there will also be executives from PC makers such as Dell and Hewlett-Packard, who hope to get a boost to sales from sales of new PCs pre-installed with Vista.

Michael Silver, analyst at the consulting firm Gartner, said: "A big coming-out party for Vista will act as a wake-up call to hardware and software vendors. Some of their infrastructure is still incomplete, device drivers not ready, applications that aren't yet compatible."

Vista was originally scheduled for release two years ago, but in 2004 Microsoft tore up all its design work, saying the product was looking too complicated. In recent weeks, though, Microsoft shares have nudged close to territory not seen since 2002, when the technology bubble was deflating, on relief that Vista is finally here.

The new software has been designed to offer more security against hackers and viruses, and there is also an improved search function. But some observers have warned that Microsoft's claims of improved business productivity may not be enough to justify a quick switch-over from the current five-year-old Windows XP system.

The new Office suite - including new versions of Word, Excel and Powerpoint - could be the last big roll-out of its kind, according to Mr Silver.

It may even spur the adoption of rival - free - open-source software, as businesses question how to replace their older versions of Office. In the longer run, free web-based spreadsheet and word processing software, such as that being offered by Google and paid for by advertising, could usurp Microsoft's traditional business model of selling software licences.

Mr Silver said: "Microsoft has two cash cows in Windows and Office, but changing the way they need to sell these could require a big turn by the company."