Looks like the Small, Cheap Computer™ craze has yet again broken Microsoft's nerve to completely kill off Windows XP.

Following the software giant's concession to extend the life of XP Home for the sub-notebook market until 2010, Microsoft is today granting the same reprieve for low-cost desktop PCs too.

Microsoft has been under considerable pressure from computer makers to keep XP licensing available for budget systems. The last-gen OS was originally set for total extinction in June, 2008 — but the popularity of smaller boxes which lack the resources to run Vista adequately has given Microsoft reason to rethink its decision. Faced with either bumping the expiration date or letting Linux eat the entire emerging market, Microsoft has chosen to let Vista play the fall guy again.

Or as Microsoft explains the story at the Computex expo in Taipei, customers were demanding Windows on the low-devices because it is familiar to them.

According to Redmond, it's working with more than 20 OEMs on the extended offering. They include Dell, Hewlett-Packard, Lenovo, Quanta, Acer and Asus.

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When the XP home licensing extension expires in 2010, Microsoft has said the successor to Vista (Windows 7), will already be in the hands of consumers. CEO Steve Ballmer insists the company hasn't made any blunders with Vista, but soon departing chairman Bill Gates has said the company could learn "plenty of lessons" from its handling of the OS.

In the meantime, Vista will still be pushed as the company's premier operating system. XP will only be offered as an alternative for the low-cost systems market, which has seen substantial popularity with computer makers recently.

Many vendors have eagerly jumped into into the small, cheap system waters — although a few are still eyeballing the idea suspiciously. For instance, AMD today said today it will "wait and see" before deciding whether to develop chips for the low-cost notebook market. Intel, on the other hand, today unveiled its Atom processor to take its turn at the market. ®

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