Microsoft's attempts to prevent Linux from over-running Asia look shaky with the news that a special low-cost, cut-down version of Windows XP still works out more expensive than a Linux box.

The software giant has recognised that price is a critical factor in the poorer countries of the world and so has created a special XP-Lite version with which to entice new users.

However a PC programme by the Malaysian government, for which Microsoft has contributed a special Bahasa Melayu (the Malay language) version of Windows XP, offers low-cost PCs with either Windows or Linux on.

The XP-Lite version costs 1,147 Malaysian Ringgits (£165) but the Linux PC is still cheaper at 988 Ringgits (£142). Both systems contain a 1.7GHz Intel Celeron processor and come with 128MB RAM, a 40GB hard disk, 56Kbit/s modem, CD-ROM and floppy drives, 15-inch monitor and 30 hours of dial-up Internet access.

The situation has not passed Microsoft by, however. Just this week it hinted it would abandon the global pricing strategy it has stuck rigidly to, for years, in an effort to prevent Linux and software piracy from wiping out its products in an expanding market.

The Malaysia deal matches the software giant's efforts in Thailand, where Linux laptops have taken off, thanks largely to companies like HP pushing the open-source software as a way to undercut Windows machines.

"We are committed to continuing to work with governments all over the world on programs and initiatives that address their specific challenges and meet the needs of their citizens," Microsoft said in a statement.

As part of the Malaysian program, Microsoft will also bundle the English version of Works Suite with its cut-down Windows PC. The Linux PC includes OpenOffice.