The release of the consumer version of Microsoft's highly anticipated Vista operating system - the latest version of its dominant Windows software - has been delayed until January 2007, a huge blow to PC makers and computer retailers who had been hoping that the new product would boost sales ahead of the vital Christmas period this year.

Shares in Microsoft fell nearly 3 per cent in morning trade in New York today on the news.

Microsoft, which has not overhauled the consumer version of Windows in more than four years, had originally been expected to release Vista, developed under the codename Longhorn, last year.

The latest setback represents the second significant delay to a much-anticipated technology product in the past month: previously, Sony had hit the hopes of gamers - and those who sell video gaming kit - by delaying the launch of its PlayStation3 system until the autumn.

Microsoft did say that the version of the software designed for business use will still be available in November 2006, but the delay to the home version is likely to see millions of potential computer buyers postponing the upgrading of their machines, according to analysts.

Microsoft said the latest delay was necessary to improve the security features that it has repeatedly flagged as one of Vista's main selling points.

The company has for some time been accused of failing to tackle effectively threats such as online identity theft. The popularity of Windows, which is used on more than 90 per cent of the world's computers, has made it the prime target for cyber-criminals.

Jim Allchin, co-president for the Platforms and Services Division at Microsoft, said: "We are trying to crank up the security level higher than ever, and so there are specific features going through testing.

"We are ratcheting up [security, performance, testing] higher than we ever have before. We are trying to do the responsible thing here and step back and ask how we can best help the industry."

The world's largest software company added that the revised release programme would also avoid confusion during the Christmas sales period. However, PC manufacturers and their suppliers had been relying on a demand for Vista machines to revive sales in the second half of this year.

"Toward the end of the year (European) sales will revive with the release of the new Windows Vista operating system," Paul Bell, the European senior vice-president of Dell, the world's largets PC manufacturer, had told the German press last month.

But today, that outlook had to be revised. "It's not the optimal situation, to be launching the next-generation version of Windows right after the big holiday sales season," Joe Wilcox of Jupiter Research told AP.

Shaw Wu, an analyst at American Technology Research in San Francisco told Reuters: "It makes the second half more difficult now [for PC makers] ... There’s less of a driver for sales."

Shares in Dell fell around 2 per cent in after-hours trade in New York after Microsoft announced the delay.

Computer chip manufacturers are also expected to suffer. Updated operating systems tend to use more processing power than older version which can translate into more lucrative sales.

A beta version of Vista is on track to be delivered to 2 million computer users for field testing in the second quarter of this year, according to Microsoft.

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