Microsoft Corp. said on Thursday it will delay the release of its Office 2007 business productivity software to improve product performance in the latest setback for the world's largest software maker.

Microsoft said it will now aim for a launch of Office 2007 to business customers by the end of 2006 rather than an earlier target of October. Microsoft also said it would delay the general availability of the Office upgrade to early 2007 from its previous January target.

The delay of the 2007 Microsoft Office package, which includes the Word processor, Excel spreadsheet and PowerPoint presentation software, marks the latest slip-up at Microsoft, which has been plagued by a series of postponements.

Microsoft had already pushed back the consumer launch of Office in March to coincide with the delayed debut of its Windows Vista operating system. It postponed the release of its much-anticipated upgrade to Windows until after the crucial holiday shopping season to improve the system's quality.

Office and Windows are Microsoft's two mainstay products, accounting for more than half of the company's total revenue.

The company also said it plans to assess the impact of the Office 2007 delay on its Windows Vista launch, which had been targeted to move at the same time as Office 2007.

In a note to clients, Citigroup analyst Brent Thill said he expects Microsoft to soon announce that the new Windows system will be delayed as well, in line with the Office 2007 postponement.

The risk is that these persistent delays could indicate quality issues that may dissuade enterprises and consumers from becoming early adopters, Thill wrote.

Microsoft said it decided to push back Office because it wanted to implement feedback from the company's latest test, or beta release.

Based on internal testing and beta 2 feedback around product performance, we are revising our development schedule, said a Microsoft spokeswoman.

Jupiter Research analyst Joe Wilcox downplayed the latest delay for Office since most businesses were probably not planning to deploy the software before the end of the year, but he said this could deal another blow to the company's image.

It may not instill much confidence with some customers, said Wilcox. Microsoft seems unable to meet its dates.

Separately, Microsoft said it streamlined its U.S. sales force as part of a broad reshuffle to be more efficient and responsive. The company laid off 5 percent, or 214, of its U.S. sales staff.

The company plans to add 66 new jobs to its sales team, resulting in a net reduction of 148 workers. Microsoft said the job cuts are unrelated to the delay of Office 2007.

Shares of Microsoft rose 31 cents, or 1.3 percent, to close at $23.47 on Nasdaq on Thursday. The stock fell slightly after news of the delay broke, but clawed back before the close of trade.

(Additional reporting by Michael Kahn in San Francisco)

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