Microsoft is to ditch key parts from the next version of its Windows software to keep its schedule on track.
Bill Gates has long promised Longhorn would be revolutionary
The software giant said it still aims to release Longhorn, as the new version of Windows is codenamed, in late 2006.
But to do so it will drop a redesign of the operating system's structure dubbed WinFS, which could have made it much easier for users to find information.
Longhorn has faced repeated delays, and Microsoft has been under pressure to firm up the release date.
If Longhorn now sticks to the schedule, five years will have passed since the current version - Windows XP - went on sale.
Despite its forays into multiple technology markets and its huge war-chest of cash, the company relies on massive margins on sales of Windows and its Office suite of programmes for most of its profits.
Further delays to Longhorn could antagonise vendors keen to use it as an opportunity to sell new PCs.
"We've had to make some trade-offs to deliver the features customers... are asking for in a reasonable timeframe," said Jim Allchin, group vice-president of Microsoft's platforms group.
And with security an ever-present concern, Microsoft's monopoly position could be further whittled away by competitors such as Linux and Apple.
The news that WinFS would only be in beta - in other words, still being tested - by the time Longhorn makes it to market was "not a good surprise", said long-time computer market analyst Rob Enderle.
The storage available within computers and on networks has grown massively in recent years, leaving the search tools available as standard in current versions of Windows struggling to keep up.
Apple Computer announced in July that the next version of its own computer operating system - codenamed "Tiger" and scheduled for release in the first half of 2005 - would have advanced search technologies.
Longhorn will lag Windows XP by five years
There are also fears that a new system called "Avalon" which would allow Windows to handle three-dimensional graphics better could be axed.
Microsoft is now promising to make sure Avalon - and a technology called Indigo intended to make it easier for PCs to use online services and talk to small devices - will be compatible with both Longhorn and XP.
But that could mean severe cutbacks in its functionality.