Microsoft Corp. disclosed Wednesday that the initial service pack of bug fixes planned for its Virtual Server 2005 software will be replaced by a for-fee "R2" upgrade by year"s end.

The software maker changed course after recognizing that the performance, availability and other improvements it was making to the product "passed the bar" to move it from service pack to product release, said Zane Adam, a director of marketing in the company"s Windows Server division.

Microsoft also outlined plans for another full release of the Virtual Server product in 2006, before it ships the next major version of the Windows Server operating system, code-named Longhorn, which is due in 2007.

A Microsoft group program manager had said at the Windows Hardware Engineering Conference in April that the company was leaning toward eliminating future versions of Virtual Server, since it will be building virtualization capabilities into Windows Server through a thin hypervisor layer of code.

The hypervisor technology, however, won"t make the initial Longhorn release, and the delivery mechanism has yet to be determined, company officials have said. Bob Muglia, senior vice president of the Windows Server division, said in June that it might happen via an R2 release of Windows Server, although some enabling capabilities would also be required in the operating system.

Microsoft got into the virtualization software market in February 2003 with its acquisition of Connectix Corp. The company launched its first Virtual Server product last October and made available a beta copy of Service Pack 1 in April. Microsoft typically rolls up all of the bug and security fixes that have accumulated since a product"s release into a software package known as a service pack.

Adam said the company "sweated" over the decision to change SP1 to a product release. He explained that the company found itself in a somewhat unique situation with Virtual Server, since the product hasn"t been on the market that long. Microsoft studied the Virtual Server customer database and found that the majority of the users with multiple copies of the product have Software Assurance, either through an enterprise agreement or Select volume-licensing contract, according to Adam.

Users who purchased Software Assurance as part of a volume-license deal with Microsoft will be entitled to receive the R2 update for free, Adam noted. Those who didn"t buy the upgrade protection will have to pay for R2.

"That is the value proposition of buying Software Assurance," Adam said.

Adam said customers who don"t have Software Assurance on Virtual Server won"t miss out on critical bug or security fixes. They get access to those automatically, he said. But they won"t get the rollup of fixes that comes with a security pack, nor the new features coming with R2, unless they buy the new product.

R2 of Virtual Server 2005 will feature 64-bit compatibility and performance and availability enhancements. Also by year"s end, Microsoft expects to extend support for Linux and other guest operating systems running on its Virtual Server software.

The follow-on Virtual Server product due for release next year will feature support for Intel Corp."s performance-boosting virtualization technology, known as VT, as well as Advanced Micro Device Inc."s new virtualization specification, called Pacifica.

Microsoft provided an update on its virtualization software plans Wednesday as part of a presentation at the Intel Developer Forum in San Francisco.