posted by Thom Holwerda on Mon 12th May 2008 17:40 UTC
IconLast week, we reported on a peculiar price difference in Australia between the Linux and Windows versions of the Asus Eee PC 900, the new model in the Eee line. The Windows model was 50 USD cheaper than the Linux model - the Linux model did have a bigger hard drive, but interestingly, the version with the smaller hard drive was not available as a Linux machine. This gave rise to speculation that Microsoft had been putting pressure on Asus to favour Windows XP over Linux. It appears Microsoft's assault in this segment of the market goes deeper than just Asus and the Eee alone.

IDG News Service is reporting that Microsoft is launching a program to promote Windows XP among manufacturers of so-called ultra low-cost PCs. These ULPCs, like the Asus Eee and the OLPC XO laptops, often come with Linux pre-installed instead of Windows, which is supposedly more cost-effective.

According to confidential documents sent from Microsoft to PC makers, the program consists of reduced prices for Windows XP licenses to ULPC manufacturers, to allow Windows XP to compete with Linux. In emerging markets like China and India, Windows XP Home will be priced at USD 26, and in developed countries USD 32.

There is a catch, as the ULPCs must have specifications below certain limits set by Microsoft. The processor must be below 1.0Ghz, and it may only include 1GB of RAM or less. Exceptions are made, though, for VIA's C7-M processors (which run between 1.0Ghz and 1.6Ghz) and Intel's Atom N270. There are also limits on screen size (10.2" maximum) and hard drives (no more than 80GB).

Microsoft's PR agency did an Apple and stated "We don't speak publicly about our agreements with [PC makers]." The documents state that PC makers are willing to enter the ULPC market, as long as they can prevent the ULPC from cannibalising sales of higher-end laptops and computers.

IDG also quotes an anonymous official at a PC maker as saying that "[Low-cost PC makers] have made some good inroads with open-source, and Microsoft wants to put a stop to it." The official appeared open to the program, claiming it might stimulate competition between Windows and Linux.

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