While most in the industry will agree with pundits who point out that quality is more important than timeliness, the delay will miss prime selling time for resellers and retailers.

It will also push the adoption window for business users back another quarter. Even though the business version of Windows Vista will be released on time in November, historically, few companies have been willing to deploy an untested Operating System until broad consumer use has helped Microsoft iron out the worst of the bugs.

So even though Microsoft plans to get the business version out on time, it was never going to translate to translate to a much in the way of reseller revenues until at least the middle of next year.

The ramifications of the shift will be far and wide with both consumers and corporate users likely to hold off any new PC purchases until Vista is released translating to hard times for system builders and silicon manufacturers through the rest of this year.

The announcement sent Microsoft shares down three per cent, but it's likely to hit CPU and component makers just as much.

"It is a critical eight- to 10-weeks for retailing and for the producers. The retailers and PC hardware manufacturers work on razor-thin margins, so the impact there could be pretty severe," David Smith, analyst at Gartner, told Reuters.

Investors, concerned about the impact of a Vista delay on PC sales, pushed down shares of chip maker Intel and large PC manufacturers Hewlett-Packard and Dell in after-hours trade.

Windows Vista is the headliner for a series of upcoming and recently released new products at the software giant, including its Xbox 360 next-generation game console and an upgrade to its popular Office business software.

The successful roll-out of those new products are vital to Microsoft reestablishing itself as a company with the robust growth potential to provide a kick-start for a largely stagnant stock over the last five years.

Windows, which is found in about 90 percent of all computer desktops, is Microsoft's biggest cash cow.

"We could have just gone ahead, but I didn't think it was the right thing to do," said Jim Allchin, co-president of the company's Platforms & Services Division. "We're setting stringent quality bars on what we do."

Microsoft said it delayed the new Windows to improve overall quality, particularly in security, and that PC makers didn't want the operating system introduced in the middle of holiday sales, because a new version would create instability in the market.

The big question is whether this is a firm date that Microsoft engineers can stick to. Longhorn was initially scheduled for a 2005 release and was not only pushed back to second half of 2006, key technologies such as a new file system were abandoned to keep the OS development on track.