It is easy to criticize Microsoft for this, because they are a big target with some issues in their history.

However, if one starts without assuming that Microsoft is acting as an evil entity and look at business decisions, this is not a bad decision from a business standpoint.

Microsoft wants to offer low prices in order to compete with Linux. Microsoft does not want to lower its own prices across the board to those it is offering for these PC's -- that would damage Microsoft's cash-flow immensely. Because any OEM would be inclined to offer this version of XP across its product-line in order to lower their own prices, Microsoft needs to put limits on the machines to which this would be applicable -- i.e., they want more than $15 for XP on a Dell XT, so they have to rule out the XT.

I'm not a fan of this move -- I want more machine for less money myself -- but it is not the bad move it is portrayed to be. If a manufacturer wants to make a small machine with touch or better specs, it simply needs to buy the operating system sold for that machine, Vista, at Vista's prices.

Most of us don't want XP because it's cheap. We want XP because it's *light*.

Vista is the 800lb gorilla in the market that wants spider monkeys. :(

This is the death blow for UMPCs. UMPCs are incapable of running Vista at acceptable speeds.

why? is a UMPC a ULCPC too?

It looks like creating business stability means stifling engineering creativity with this decision. It's not surprising that both are needed, and sometimes in conflict, but this one seems clearly the one over the other.

Sometimes variety, a consumer good, is going to be at variance with low price, a different consumer good.

Strange decision.

As usual, Microsoft misses the "intent" of the market.

"Ultra Low Cost" PC's already exist. I can go to Best Buy, and purchase a 15" laptop for the same price that I can purchase an HP 2133. It will run Vista, and have a battery life of 2-3 hours.

Many folks are moving to the "slower processor" low cost PC's to improve battery life. Vista is too much of a resource "hog" and disk hog to make it a practical OS.

Microsoft should "nlight" XP, make sure the tablet functions and touch-screen options work, and position it as a true "alternative" to Linux. This strategy just confuses the $400-$800 small screen PC even more.

Hoot:

No question. MS needs a "Vista lite".

It seems as though MS is afraid that people will find out that there are alternatives to Windows.

Most people that use computers could probably care less what's under the hood if they could read their email and surf the web. Better yet is finding out that they could get a full Office suite in something like Open Office for free and type, print, and send documents like they always have.

My feeling is that the public really don't know about these alternatives, and MS wants to keep it that way.

Most if not all UMPCs have touch screens. The high end HP Mini Note comes with a 120 GB hard drive.

MS seems to have forgotten to business rule that it's better to cannibalize your own sales rather than let a competitor (in this case Linux) win.

Forcing manufacturers to leave off the touch screen takes away from the competitive advantage MS has with Tablet PC functionality.

From a purely competitive point of view, the greatest competitor for touch in $500 and under devices is not Linux (yet), it's Apple and the iPhone. I'm watching to see what Apple does with touch in the future. I think the Linux world is watching too as they try to figure out the magic touch recipe.

In a way Apple is in the best position to innovate here since it manages both the software and hardware sides. I wouldn't vote against anyone, however, at this point. Sparks of creativity can come from anywhere.

I guess many people are confused about UMPC vs. ULCPC.

While both terms are marketing terms that any manufacturer can use as they please, usually the following applies:

ULCPCs (Ultra Low Cost PCs) are devices like the EeePC that come in at around $400. They have a cheap processor, limited RAM and disk space and a cheap, small LCD screen. And I don't think any one of those ULCPCs that are currently offered features a touch screen - this would make them more expensive.

A UMPC (Ultra Mobile PC) on the other hand is a device that usually has a touch screen, often has extended communication abilities (Bluetooth, 3G modem), larger / more expensive memory / disk space.

A low spec UMPC obviously could also be a ULCPC.

As far as Microsoft goes:
From all I have read, MS is NOT saying that manufacturers cannot sell ULCPCs with a touchscreen and XP (or even XP Tablet Edition). All they are saying that they will only provide XP Home at a deep discount (at between $16 and $32) to OEMs. Nothing keeps OEMs from using "normal" OEM licenses with a touchscreen ULCPCs - they just cost the normal price.

It would be different if MS were saying they are not licensing XP anymore except XP Home for the ULCPC market and only to OEMs building devices with the said limitations.

As for the comment that this is the "death blow" for UMPCs (from virtuous): My HTC Shift is running Vista at an acceptable speed (XP might be faster, haven't tried it) and so far it has not died on me :-)
Future generations of UMPCs (and potentially MIDs) should have even less problems running Vista - provided manufacturers equip them with state of the art components including 2GB RAM (not that expensive anymore). This might again be a matter of price. If somebody wants to use a MID that is mainly cheap - go with Linux. I certainly would because I would not want to use a MID like a full PC anyway.