Microsoft feeling heat from Linux in budget flash PC market

Microsoft announced plans today to expand support for Windows XP on budget flash-storage computing devices with an eye towards getting Windows XP running on the OLPC. The software giant will publish design guidelines next year that will make it possible for manufacturers of low-cost mobile devices to build hardware that provides optimal compatibility with Microsoft's legacy operating system. The company also announced plans for field trials next month that will put Windows XP to the test on One Laptop Per Child (OLPC) project's XO laptop.

Microsoft's newfound interest in this space is largely a response to growing demand for inexpensive subnotebook hardware that uses flash-based storage. Manufacturers of such devices are increasingly adopting Linux instead of Windows because Linux is free and easier to adapt for use on systems with limited computing power and storage capacity. Microsoft likely views the rising popularity of Linux-based budget mobile hardware in the developing world as a significant competitive threat.

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Asus recently entered the budget subnotebook market with the Asus Eee PC, which we characterized as a game-changer shortly after it hit store shelves. When we took an early look at the implications of the Eee, we pointed out that it represents a serious loss for Microsoft as well as the fact that major device makers are giving Microsoft the cold shoulder, turning to Linux for their next-generation portable computing products.

Microsoft seems determined to turn things around in the ultramobile space and is now making a valiant effort to meet the requirements of hardware manufacturers. Although Microsoft has been quick to respond to the competitive threat from open source in the portable computing arena, questions still remain about the viability of Windows on budget mobile hardware, especially given the relatively skimpy amount of storage (1-4GB) that the devices have.

It is important to note that this initiative focuses on Microsoft's Windows XP, rather than Microsoft's latest OS, Windows Vista. For companies like Asus, Linux appears to be a more future-proof option and is much easier to modify to fit within the constraints of devices with low hardware overhead. Asus and Microsoft have already announced plans to sell XP-equipped versions of the Eee PC, but Microsoft is scheduled to end sales of Windows XP next June, and should the company hold fast to that deadline, the roadmap for Windows on budget, ultramobile PCs is unclear.

Interest in low-cost educational computing devices like Intel's Classmate PC and the OLPC XO laptop are obviously also driving Microsoft's increased attention on this market, but the company is clearly concerned about mainstream commercial offerings like the Eee PC and upcoming Intel MID products for which Intel is vigorously promoting Linux. Windows may have a hard time keeping up.