Microsoft began 2006 hoping that it could end the year with Windows Vista and Office 2007 on store shelves.

The software maker missed that goal, by and large. It did end up finishing both products in November. But while that allowed enough time for Microsoft to offer the products up to big businesses, the average Joe and Joanne will have to wait until the end of January 2007 to get their copies.

While the Windows and Office teams were cranking away in one part of Redmond, teams elsewhere worked to add "Live" to nearly everything the company does. Microsoft announced plans for the Internet services and ad-funded software push in late 2005, but it spent much of 2006 trying to serve up the first fruits of the strategy.

One of the biggest undertakings was the revamp of Hotmail into a more modern Web mail service, Windows Live Mail. The company had hoped to have a final version ready this year, but had to settle for removing the beta tag only in the Netherlands. It fared better on the instant-messaging front, releasing a final version of Windows Live Messenger and adding interoperability with Yahoo's IM network.

Microsoft also worked to get the advertising piece of its services strategy in place. In the spring, it began using its own search advertising engine, AdCenter, for all its U.S. search queries, though the move ended up causing a near-term hit to the business. The company also expanded its ad efforts to video gaming, with the May purchase of Massive.

And, after years of getting trounced by Apple Computer's iPod in the digital music arena, Microsoft put its partner-centered PlaysForSure effort on the back burner and launched its own Zune player and service.

Microsoft also generated an unusual amount of buzz around its Origami project. However, as more details about the mini-tablet PC surfaced, enthusiasm waned considerably. In the end, the first devices went on sale for considerably more than a hoped-for $500. The devices also fell short of the all-day battery life that some had expected.

The year was a major transition in other areas. Microsoft continued to shuffle around executives, amid continuing fallout from a reorganization that began in 2005. In one key move, the reorg brought longtime Office executive Steven Sinofsky over to the Windows side of the house to head operating-system development.

But the biggest personnel announcement came in a June stunner from Chairman Bill Gates, who said he will shift to a part-time role in 2008, allowing him to devote more time to his philanthropy work.

On the legal front, Microsoft continued to battle with European antitrust regulators and also found itself the target of a lawsuit filed by Symantec. Meanwhile, it tried to make some peace with longtime rival Novell, announcing a deal in November in which the two companies would work together to help make Windows work better with Novell's Suse Linux. Microsoft also agreed to offer legal protection to those who use Suse's version of Linux.

The detente didn't last long. Within a month, the parties had "agreed to disagree" over whether Linux did infringe on Microsoft's patents.

--Ina Fried

2006 Highlights

Origami: Enough of anything?

Microsoft's "ultramobile" PC will be small and light. But company had more ambitious goals in mind.

Microsoft to shake up Windows leadership

Steve Sinofsky, the head of the Office unit, has been tapped to lead Windows development in the wake of another delay.

Hotmail's new address

An overhaul of the long-neglected Web e-mail is the cornerstone of Microsoft's plan to win fans to its Windows Live services. How's it going?

Microsoft takes plunge with AdCenter

Software maker says it is now using its own ad-serving engine for all its U.S. search queries.

The end of the Gates era

Microsoft and Bill Gates have long been nearly synonymous. That's about to change, as he looks to 2008 as the end of his day-to-day involvement.

Microsoft's Zune to rival Apple's iPod

Software giant finally goes public on plans for new music player and associated service.

Microsoft changes Vista over antitrust concerns

Company revises several features in Vista in response to concerns raised by antitrust officials.

Microsoft makes Linux pact with Novell

Former software foes pledge to work together to help Windows world and Linux world interoperate.

Hotmail's replacement is going Dutch

Microsoft moves Windows Live Mail out of beta in the Netherlands but won't launch final version elsewhere until next year.

Microsoft, Novell spar over Linux agreement

Novell CEO issues open letter saying deal is not an admission that the open-source OS infringes on Microsoft's patents.

Microsoft takes wraps off Vista for business

New versions of Office and Exchange, too. But are businesses ready to buy?

Microsoft sings a new Zune

Microsoft's newly released music player is the latest in a years-long desire to counter Apple's dominance in the sector.