On August 27, 2004, Microsoft group vice president Jim Allchin told employees that the company still planned to ship Longhorn to customers in calendar year 2006. But to meet that schedule, it would make a major change: WinFS, the new Windows storage subsystem, would ship sometime after Longhorn, so it was no longer part of the product. Even more dramatically, Microsoft would make the other two major Longhorn technological pillars, the Avalon presentation layer and the Indigo communications system, available to users running Windows XP and Windows Server 2003.

“Allowing developers worldwide to target this existing installed base will create huge new opportunities for them and enable exciting new experiences for hundreds of millions of PC users,” Allchin explained. But left unsaid was a shocking reality from which the Windows team was still reeling: Longhorn as originally envisioned would not come to market and Microsoft had “reset” development of the product using Windows Server 2003 with Service Pack 1 (SP1) as its new base.