Microsoft is taking on Linux by drastically cutting the price of its XP operating system for low-cost PCs like the Asus Eee.

Microsoft announced that it would keep the aging OS available for UMPC manufacturers early last month, but has now revealed pricing.

It will charge manufacturers in developing markets £13 to have Windows XP Home preloaded on low-cost machines, while those in the developed world will pay £16.

According to US title, PC World, manufacturers could get a further $10 (around £5) more off those prices if they are eligible for Microsoft's market development scheme.

The discount is limited to machines with screens no larger than 10.2 inch, excluding touchscreens, and with hard disks no larger than 80GB.

In the meantime, however, Microsoft is sticking with a 30 June 2010 deadline for Windows XP Home for ULCPCs, or 1 year after general availability of the next version of Windows - although manufacturers including Dell are finding ways around this because of the huge popularity of XP over Vista.