Microsoft plans to extend the availability of Windows XP for low-cost laptops beyond June 30, with an announcement expected later this week, according to a source familiar with the situation.

June 30 is the date when Microsoft plans to stop selling most Windows XP licenses. The announcement that Microsoft will extend this deadline for low-cost laptops is expected to be made in the United States, although it appears timed to coincide with the Intel Developer Forum (IDF) being held in Shanghai on Wednesday and Thursday.

[ Sidebar: Despite deadlines, Windows XP to be sold a few more years ]

A Microsoft spokeswoman did not respond to a request for comment on the expected announcement.

Intel is using IDF to herald the imminent arrival of handheld computers and low-cost laptops based on its upcoming Atom processors. Many of these devices will lack the storage capacity and memory needed to run Vista. As a result, hardware makers and industry analysts expect most to run either Windows XP or Linux. Intel has also been working closely with Linux developers to customize the open source operating system for handheld computers it calls "mobile Internet devices," or MIDs.

Vista is not deemed a practical option for laptops equipped with just 512MB of RAM and 2GB of storage. Even Vista Starter, the low-cost and stripped-down version that Microsoft developed for emerging markets, still requires 15GB of free storage. Another problem is Vista's cost, which would likely push system prices beyond the $250 to $300 range where Intel hopes to see many of these Atom-based laptops priced.

Microsoft set the June 30 deadline as a way of pushing users toward Windows Vista, and the expected extension of Windows XP for low-cost laptops may not affect that objective.

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Intel is setting strict guidelines for system builders that are designed to segment the laptop market by restricting features, such as screen size, that can be used with an Atom processor. These rules are designed to make sure that low-cost laptop sales do not cannibalize sales of mainstream laptops based on Intel's Core 2 Duo mobile processors.