June 29 (Bloomberg) -- Microsoft Corp. delayed the release of its new Office word processing, e-mail and spreadsheet program to make improvements to its performance and design.

The release of Office 2007 for businesses, previously scheduled for October, will now be unveiled sometime before the end of the year, Vice President Antoine Leblond, said in an interview. Office will still reach stores in January as planned, he said.

The delay is a setback for Microsoft, which has struggled to release its Office and Windows products on time. In March, Microsoft said the new version of Windows wouldn't be out for the holiday shopping season. Office sales growth slowed to less than 5 percent last quarter as customers await the new product.

``This is another black eye around scheduling and Microsoft,'' said Greg DeMichillie, an analyst at Kirkland Washington-based Directions on Microsoft. ``This potentially means another quarter of slow growth for Office.''

Microsoft already delayed the retail availability of Office to January to have it on store shelves at the same time as Windows Vista.

More than 2.5 million people are using the second test version of Office 2007 and unlike in past versions, Microsoft can now track precisely what parts of the software aren't performing, Leblond said. The company decided to take extra time to fix some of the top features that aren't running as quickly as they should.

Office 2007 also features a complete overhaul of the program's familiar design and so Microsoft is tracking whether users are having difficulty finding the features they need. The team will work to fix that as well, he said.

Making Improvements

Microsoft decided to improve the product ``instead of trying to drive relentlessly towards a specific date,'' Leblond said.

``We feel like we have a responsibility to ship the best software we can,'' said Leblond, who was appointed last month to run the Office Productivity Applications group.

Shares of Redmond, Washington-based Microsoft rose 31 cents to $23.47 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

Most business customers test new versions of Office for several quarters and stop buying the older version for a few quarters before a new release, meaning delays can lead to an additional period with slower growth.

Few business customers are likely to begin testing Office 2007 immediately whether it comes out in October or December, said Joe Wilcox, an analyst at Jupiter Research.

``October, November, December is all about the same,'' he said. ``What business is going to tell its information technology staff to test a new version during the holidays?''

Test Version Delay

Microsoft in the last several weeks decided to postpone by six weeks the release of the next Office test, called Beta 2 Tech Refresh, Leblond said. It's not clear how long the final version will be delayed and Microsoft probably won't know until after the Tech Refresh is released and tested, he said.

The PowerPoint slide show program is also running behind schedule because Microsoft made a lot of changes to the program for the new version, Leblond said. The company has reassigned software testers from other Office products to help finish PowerPoint, he said.

To contact the reporter on this story: Dina Bass in Seattle at Dbass2@bloomberg.net.

Last Updated: June 29, 2006 16:17 EDT