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Microsoft Windows 7 in Time for Holidays

Vista, we hardly knew ya.

In an effort to get Windows 7, its newest computer operating system, into PCs in time for the holidays, Microsoft (MSFT - Get Report) says it plans to release the software to manufacturers in July.

Windows 7, which wasn't set for release until 2010, is now expected to be available in stores and online Oct., according to published reports -- after the key back-to-school rush but well before the end-of-the-year gift-giving season.

PC makers such as Dell (symbol) are counting on Windows 7 to kick off a massive PC replacement cycle.

Windows 7 replaces the wildly disappointing Windows Vista software that users shunned in favor of the 8-year-old predecessor Windows XP. Vista's failure may help deliver some success for Microsoft if Windows 7 lives up to early expectations.

Vista was so unpopular that Gartner estimates 60% of PC users never bothered to upgrade from XP, and among business users, some 75% are still on the XP or older programs. If nothing else, this could spell pent up demand for Windows 7.

If a mere 2% of the 1 billion PC owners upgraded to Windows 7 in the first year, it could give Microsoft a sweet $1.64 billion revenue lift, Collins Stewart analyst Sandeep Aggarwal wrote earlier this year.

Microsoft could use a hit. Thanks in part to Vista, the stock went sideways for five years before dropping 44% last year. Microsoft found little traction in markets outside its desktop software franchise. Meanwhile Google (GOOG) has dominated the search business, and smartphone developers like Apple (AAPL) and Research In Motion (RIMM) have taken the design lead in mobile operating systems.

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