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Friday, June 30, 2006 - Page updated at 12:00 AM

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Microsoft delays Office '07

Seattle Times technology reporter

In the most recent delay plaguing its flagship products, Microsoft will deliver Office 2007 later than planned, potentially compounding damage to the company's credibility.

The next version of Office, including popular word processing, spreadsheet and presentation software, as well as components of several business tools, will be available for large-volume customers by the end of 2006 rather than in October, Microsoft said through its public-relations agency Thursday.

For consumers and small businesses, the software had been targeted for release in January and is now scheduled for "early 2007."

The Office delay comes three months after Microsoft again pushed back the release of its flagship Windows Vista operating system, now scheduled for broad availability in January, missing the holiday shopping season.

"The bottom line is Microsoft gives guidance, which businesses are trying to make plans around, but consistently is unable to meet the dates in the guidance," said Joe Wilcox, a senior analyst at Jupiter Research. "At some point, that's got to impact somebody's confidence in Microsoft."

The delay is a result of issues with "product performance" identified in internal testing and by users of a test version of the software released last month, according to the company.

"Feedback on quality and performance will ultimately determine the exact [release] dates," the company said.

Wilcox and other analysts noted that the Office system has grown in complexity with the 2007 release, which could be a reason it's taking longer than the company expected.

"These gigantic releases that take X number of years, they present a lot of strain," said Michael Silver, a research vice president in Gartner's client-computing group.

Office 2007 will have a revamped user interface, new file formats and connections to a host of business applications created by Microsoft and other software vendors such as SAP.

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"You can look at Office on its own merits as a desktop-productivity suite, but it's becoming much more important as a family of products for Microsoft," said Dwight Davis, vice president and practice director at Summit Strategies.

He also noted that the Office delay is surprising, given that division's track record.

"To the degree that there have been notable delays in Microsoft product launches, the operating systems have been the main transgressors," Davis said, adding that server products have also been notable offenders. "The Office team has been relatively good in holding to its target schedules."

Sales unlikely to be hurt

The divisions building Vista and Office 2007 accounted for 58 percent of Microsoft's revenue in the 2005 fiscal year. Still, analysts did not expect the Office delay to hurt sales.

"I don't think it's a huge revenue impact ... because so much of the Office product is bought on subscription," said Charles Di Bona, analyst with Sanford C. Bernstein, which owns Microsoft stock. "The psychological impact is more substantial."

Microsoft shares gained 31 cents, 1.3 percent, to close at $23.47 Thursday but lost 5 cents in after-market trading.

Laura DiDio, a Yankee Group analyst, said Microsoft's product delays are not significant individually.

"But collectively, they do seem to form a pattern which can be very disturbing, particularly when you see that competitors like Google, Red Hat, etc., are not just nipping at Microsoft's heels, but they're passing them by," DiDio said.

Another Vista delay?

Microsoft's vague language around the timing of the release of Office 2007 added weight to speculation that Vista would be delayed again and the two products would be launched together.

"Microsoft will likely continue to shoot for a joint release of Office and Vista, so we expect to hear that Vista will also be pushed back to late 2006 for volume [customers]" and late in the first quarter or possibly into the second quarter of 2007 for consumers, wrote Brent Thill, director of software research for Citigroup, in a note to investors Thursday. Citigroup owns stock in Microsoft and has done investment banking business with the company.

Michael Burk, a Windows product manager, said there is no news on Vista.

"We continue to maintain the target dates that we have set in the past and nothing has changed," he said, adding that "final and exact delivery dates depend on the quality of the product."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

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