Analysts say Microsoft has been under increasing pressure to provide a ‘lite' version of XP for these low-cost computers as Vista is known as being too resource-hungry for those machines and has made life difficult for users as the size and power-sucking ability of Vista becomes an impediment.

Two months ago Microsoft extended its deadline for selling Windows XP licenses for low-cost laptops like the Asus Eee PC. It had originally planned to stop selling most XP licenses on 30 June.

But it is unclear what, if any limitations Microsoft may put on PC makers to prevent them from installing Windows XP on more capable machines and said the decision was a response to the growing popularity of Nettops and Netbooks and to demands from PC makers.