Microsoft's Windows XP will be on a version of Asustek's ultra low-cost laptop, Eee PC, by the end of this year, the companies have announced.

Launched at Computex, the Eee PC is a laptop designed for children and emerging markets that weighs less than one kilogram and has a 7in LCD screen. Asustek officially put the first version of the Eee PC, costing NT$11,100 (£170), on sale yesterday in Taiwan. Local retailers reported they sold out of stock on the first day (See: Ultra-low cost Eee PC sold out already)

Asustek announced three other configurations of the Eee PC that it will release by the end of November.

Eee PC All four versions of the Eee PC will run a Linux OS from Xandros. The Eee PC won praise earlier this year as another low-cost alternative to laptops such as the XO developed by the OLPC (One Laptop Per Child Project). OLPC hopes to someday whittle down the price of its laptop design to $100 from around double that currently. The cheapest Eee PC announced on Tuesday, the 'Surf' with a 2GB flash memory drive, will retail for NT$7,999 (£125)) when it comes out around the end of November.

Microsoft hopes to tap into the growing excitement in the ultra-low cost laptop space, but Asustek won't launch an Eee PC with Windows XP on board until the end of this year. "XP fits the low-cost segment," said Davis Tsai, general manager of Microsoft Taiwan.

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But the trouble with the OS is that Microsoft is trying to retire it in favour of its new OS, Vista. Microsoft has already agreed to extend sales of XP through June 2008, Tsai said. Beyond that, the future is unclear for the OS.

The groups making low-cost laptops would likely not take well to using Vista since the OS requires more hardware, including more RAM and much larger hard disk space. The configurations would make a laptop far more expensive than the components required for XP.

When asked if Microsoft will continue to sell XP to the low-cost segment of the PC industry, Tsai said the company will work with partners on the issue. He declined further comment.

Asustek showed off one Eee PC running Microsoft Windows XP Professional, version 2002, Service Pack 2. The hardware on board was the same as for the NT$11,100 Linux-based Eee PCs the company had displayed, a 900MHz Intel Celeron M processor, 512MB of DDR2 DRAM and 4GB flash drives.

The Windows Eee PC included Office 2003 versions of Excel, PowerPoint and Word.