After months of waffling, Microsoft clarified plans for future versions of Windows Server, pegging 2007 as the target for a server version of the company's next-generation operating system, known as Longhorn. A client version of Longhorn should come six to 12 months before Longhorn server, but company officials stopped short of saying the client would arrive in 2006.

It's the first time Microsoft has attached a date to Longhorn, even though chairman Bill Gates and other company executives have talked up the operating system since last fall and released early code to developers. "Microsoft has [now] put something in writing, so customers can begin to plan around the delivery schedule," says Al Gillen, an analyst with research firm IDC.

In an effort to make its product cycle more predictable, Microsoft plans major upgrades to Windows Server every four years, punctuated by smaller-scale "update releases" in between. Microsoft will deliver an update to Windows Server 2003, code-named R2, in the second half of next year. Among R2's improvements: remote secure access to data without a VPN; support for intercompany directory services; the ability to quarantine PCs that aren't up to date on patches.

Transitioning to Longhorn server will be easiest for companies running Windows Server 2003 or R2, says Bob Muglia, senior VP of Microsoft's Windows Server Division. At the end of last year, only 12.7% of the Windows server installed base ran Windows Server 2003, according to IDC. That means many Microsoft customers face one big upgrade, to Windows Server 2003, before tackling Longhorn.