XO laptops with Windows will cost $206 to $208. Only $3 is for Windows, while $15 to $17 covers the cost of adjusting the machines to run the operating system.

The OLPC has competition from Windows based low-cost laptops from Intel. Last month, Intel unveiled new features for its line of low-cost laptops for schools.

Intel's new Classmate PCs, which sell for between $300 and $500, reflect the company's growing efforts to sell computers equipped with its chips to schools in developing countries, a battleground for technology companies because of the millions of people there just coming online.

Microsoft calls its own efforts to extend further into these markets Unlimited Potential. The company's goal is to reach the "next billion" people as technology sales growth in the developed world slows.

In a blog post, James Utzschneider with Microsoft's Unlimited Potential program provided additional details on the Windows+XO announcement.

"Initially it will only be available in emerging market countries where governments or NGOs are subsidizing the purchase of a large number of PCs for students, but there is the possibility of making this available for other customers through a broader set of channels at a later point in time. ...

"It is the same basic Windows XP implementation that runs on the Intel Class Mate, ASUS eeePC, and other products in this emerging class of ultra low cost laptop PCs." (Microsoft recently announced that Windows XP Home would be available for installation on this category of machine until 2010.)

Utzschneider addressed the question of demand for Windows-based XOs. It's coming from three main groups, he wrote.

-- "People who have fallen in love with that cute little green laptop with its excellent industrial design but are committed to Windows."

-- "Governments who are considering deployment of the XO en masse but also want the low deployment risk and broad support that the Windows ecosystem can provide them. ... [B]elieve it or not, it's easier to find Windows system administrators in places like India and Africa than it is to find Linux system administrators, and the Windows IT Pros cost less."

-- "People -- usually policy makers -- in governments who see a direct link between technology investments in education and the need to expand the skills capacity of their workforce on a national scale."