Sensing that rival Linux is slowly gaining popularity in low-cost small size notebook and UMPC segment, Microsoft recently cracked a deal with PC makers under which MS will offer discounted version of Windows operating system for machines with less than 10.2" screen size. One of the main reason for this strategic decision is to limit the hardware capabilities of low cost PCs so that they don't eat into the market for mainstream PCs running Windows Vista.

But to be eligible, the PC makers will have to make sure that the machine runs on less than 1GHz processor (though Via C7-M running between 1.0GHz and 1.6GHz, and Intel's upcoming Atom N270 are allowed), and features less than 1GB RAM, and 80GB HDD. And also, the PC shouldn't feature touchscreen.

PC World reports, "Microsoft plans to charge PC makers $26 for Windows XP Home Edition for ULPCs sold in emerging markets such as China and India, and $32 for those sold in developed markets, the documents show. PC makers who are eligible for its Market Development Agreement, however, can get a discount of as much as $10 off those prices."

[Via PC World]