Microsoft eases hardware terms for XP on low-cost PCs

IDG News Service - Microsoft Corp. has loosened the hardware restrictions that PC makers must adhere to in order to install Windows XP on ultralow-cost PCs, according to documents seen by IDG News Service.

While June 30 marked the last day for selling most new Windows XP licenses, Microsoft has made several exceptions for the older operating system, including its use on ultralow-cost laptops such as the Asus Eee PC, as well as on an emerging class of minidesktops. These devices are sometimes called "netbooks" or "nettops."

Microsoft is offering Windows XP Home Edition to encourage PC makers to use that operating system instead of Linux on the low-cost machines, but it has placed restrictions on the hardware that can be offered.

Under the new terms, outlined in the documents, PC makers must limit screen size to 14.1 in. and hard-drive capacity to 160GB. Ultralow-cost PCs with touch screens will also be eligible. Earlier terms set in April did not allow touch screens at all and limited screen sizes to 10.2 in. and hard-drive capacity to 80GB. The processors are still limited to a single-core chip running at no more than 1 GHz, with memory limited to 1GB of RAM.

Ultralow-cost PCs are an emerging class of products with limited system capabilities in the $250 to $500 range. Examples include the Asus Eee PC and Microstar International's Wind. They are designed for basic tasks such as surfing the Internet and sending e-mail, but not for more advanced tasks like video editing.

The updated terms, especially the larger screen size, mean Windows XP can be used on machines that look more like standard low-cost laptops. But ultralow-cost PCs are not only defined by their size, and they remain a distinct product category due to their limited performance, said Roger Kay, founder and president of Endpoint Technologies Associates Inc. "You can have a low-cost PC that's not small," Kay said.

The goal of the program is apparently to limit the hardware capabilities of such PCs so that they don't eat into the market for mainstream PCs running Windows Vista, something both Microsoft and PC vendors would want to avoid.

As part of the new terms, Microsoft also added low-cost desktops to the list of products eligible for Windows XP Home, and it added Windows Vista Home Basic as a second operating system option.

Microsoft declined to comment on the matter, saying it doesn't speak publicly about the details of its agreements with PC makers.

Low-cost PC vendors may be pushing Microsoft to keep Windows XP available, Kay said. Linux is another option for ultralow-cost PCs, but is not yet a viable alternative, according to Kay. "I don't think Linux is going anywhere in the low-cost market," he said. "Linux doesn't really cut it when it comes to compatibility."

The documents show that for developed markets, Microsoft charges $32 to install XP Home Edition on standard netbooks and $47 for netbooks with the larger screens. PC makers that meet certain requirements in Microsoft's Market Development Agreement can get a discount of as much as $10 on those prices, the documents show. There is a similar discount for systems sold in emerging markets, although the starting prices are lower, at $26 and $43, respectively.