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Microsoft Struts Its Stuff

"Vista" may be the moniker Microsoft (MSFT - Get Report) gave the next version of its Windows operating system, but investors haven't had a clear view of the long-anticipated product -- until maybe now.

Analysts and investors are hoping that Bill Gates & Co. will offer a closer peek at Vista, formerly called Longhorn, at the company's annual analyst-day meeting Thursday in Redmond, Wash., the day after Microsoft released the first beta of the product. They're also looking for more clarity on a host of other issues, ranging from a higher dividend to Internet search.

"What I want to hear is that they've got renewed vigor to really execute on these opportunities and make sure they have the key people working in the right direction," says Chris Bonavico, a portfolio manager with Delaware Investments, which holds Microsoft shares. "I'm getting a little frustrated with the fact that things have been so long in coming."

Indeed, when it launches in late 2006, Vista will be Microsoft's first operating system update since Windows XP launched in 2001. The debut of Vista will culminate what Pacific Crest analyst Brendan Barnicle recently called Microsoft's "most exciting product cycle in several years."

Three products will kick off the cycle this fall: an update to the SQL server database, new developer tools called Visual Studio 2005, and Xbox 360, the next-generation video console. Then, Microsoft is expected to release the next version of its Office suite at the same time as Vista, followed by a new server operating system in 2007.

"These products should drive growth for Microsoft and provide the most compelling reason to own MSFT shares," Barnicle wrote in a note last week. Barnicle has an outperform rating on Microsoft and a lofty $40 price target on the stock -- one of the highest among analysts. (Barnicle or a member of his family holds Microsoft shares.)

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