Software giant Microsoft yesterday launched the latest version of its Windows operating system Windows Vista.

The new operating system, unveiled together with a fresh version of the Office business software package, is one of the most important new products in Microsoft's history, coming five years after the company last updated Windows, the longest yet gap between updates.

This Microsoft handout image issued on Tuesday shows the dialog bos of the Vista operating system. Windows Vista business version shtarted to sell worldwide November 30, 2006. [AFP]

The long-delayed upgrades to Microsoft's cornerstone software went on sale to large-scale businesses yesterday, and their reception will set the tone for 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.

Microsoft has invested an estimated US$7 billion in developing Vista and an estimated 90 million copies of Vista could be shipped in the first year, mainly to consumers buying new home PCs.

But businesses may not start adopting it in large numbers until 2008 at the earliest.

It is estimated that it will take until 2010 before even a third of office computers are using Vista.

The company has estimated that revenue will only start to increase gradually with 2007 earnings to grow at between 13 and 15 per cent year-on-year, compared with the 11 per cent increase in 2006.

Steve Ballmer, Microsoft chief executive, was last night due to launch the products at the Nasdaq stock exchange in New York with executives from PC makers such as Dell and Hewlett-Packard on hand. The computer makers are eager to get a sales boost from sales of new PCs pre-installed with Vista.

Michael Silver, analyst at consulting firm Gartner, said the launch would spur other computer companies to bring out their own new products.

"A big coming-out party for Vista will act as a wake-up call to hardware and software vendors," said Silver.

"Some of their infrastructure is still incomplete, device drivers not ready, applications aren't yet compatible."

Back to the drawing board

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 high ground not seen since 2002 with 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 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 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.

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."