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updated 9/29/2004 9:08:45 AM ET 2004-09-29T13:08:45

Microsoft Corp. announced Wednesday that it would offer a low-cost, localized version of its Windows XP operating system in India to tap the large market potential in this country of 1 billion people, most of whom do not speak English.

The Windows XP Starter Edition, designed for first-time personal computer users in India's national language, Hindi, will be "significantly cheaper" than the Windows XP, said Rajeev Kaul, managing director of Microsoft India.  (Microsoft is a partner in MSNBC.)

Kaul, however, didn't divulge the price, saying the software would be available only through desktop manufacturers and the price decided weeks before its launch early next year.  If the Hindi version works well, the company plans to offer the software in 14 other Indian languages.

"It is easy to use, and is the most affordable version of Windows so far," Kaul said of the Starter Edition, which is also being rolled out in Malaysia, Thailand, Indonesia and Russia.

The new software, analysts say, is an attempt by Microsoft to protect its market share from the open-source Linux system and software piracy.

Although Microsoft still accounts for 90 percent of the desktop software market in India, several major computer retailers, including IBM and Sun Microsystems, in the past year have begun offering hardware with locally adapted Linux installed.

"In some ways, it is the recognition of the kind of momentum that we have had in the market place," said Javed F. Tapia, India director of Red Hat, which distributes customized versions of Linux software.

Linux is open-source software available for little or no cost to computer vendors and users because no licensing fee is charged in its basic form.

"Though open source is not free, people think it is so cheap that it is virtually free.  To counter this psychology, Microsoft may also want to create the impression that Windows is so cheap that it is also virtually free," said Pawan Kumar, the chief of VMoksha Technologies, a Bangalore-based software services firm.

"Now Windows may be used increasingly in assembled computers, cutting down piracy there. It is good for the market in the long run," Kumar said.

Computer sales in India have been buoyant, growing 35 percent annually in recent years.  But companies like Microsoft benefit little from the boom, because about 80 percent of the computers are assembled by local manufacturers who mostly install pirated software.

"It will also help in bridging the price gap between the branded computers and those assembled by local manufacturers," said Vinnie Mehta, executive director of the Manufacturing Association of Information Technology in India.

A locally assembled computer costs anything between $325 and $545, depending on whether it is loaded with pirated or licensed software. Windows XP costs about $150 and its pirated version can be had for $10 to $20.

Microsoft officials insisted, however, that the new software is neither aimed at countering competition from Linux, nor curbing piracy.

Kaul said the main objective is to create new buyers in India, where only 12 out of 1,000 people own a computer.  More than 300 million people could afford a computer if it was loaded with a software that comes in a local language and offers easy-to-handle tools, he said.

Microsoft developed the Starter Edition after conducting a survey of 1,000 middle-class households across India to determine their requirements and the price they were willing to pay for a computer, Kaul said.

Key features of the new software include enhanced help, country-specific motifs, and "preconfigured settings" for features that might confuse novices.  It has a redesigned help menu with a detailed "Getting Started Guide" and offers wallpaper photos of the Taj Mahal, the Royal Bengal tiger and the Indian flag.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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