The founder of the ambitious "$100 laptop" project, which plans to give inexpensive computers to schoolchildren in developing countries, revealed Thursday the machine now costs $175 US and will be able to run Windows in addition to its homegrown, open-source interface.

Nicholas Negroponte, the head of the non-profit One Laptop Per Child project, updated analysts and journalists on where the effort stands at a press conference in Cambridge, Mass., saying "we are perhaps at the most critical stage of OLPC's life."

That's partly because at least seven nations have committed to being in the initial wave to buy the little green-and-white "XO" computers — Uruguay, Argentina, Brazil, Pakistan, Thailand, Nigeria and Libya — but it remains unclear which ones will be first to pony up the cash.

The project needs orders for three million machines so its manufacturing and distribution effort can get rolling.

Negroponte, the former director of the Massachusetts Institute of Technology Media Lab,expects mass production to begin by October. Hesaid many other countries, including Peru and Russia, have been inquiring about taking part.

The XO machines will be made by Quanta Computer Inc., the world's largest contract manufacturer of laptop computers. Quanta agreed to take a profit of about $3 US per machine, less than what it gets from mainstream PC companies, Negroponte said.

Even so, the cost of the machine — which boasts extremely low electricity consumption, a pulley for hand-generated power, built-in wireless networking and a screen with indoor and outdoor reading modes — is now $175 US. The One Laptop project takes an additional $1 USto fund its distribution efforts.

Negroponte's team has always stressed that $100 US was a long-term target for the machines, but recently publicized figures had put the laptop in the $150 US range. Negroponte said the cost should drop about 25 per cent per year as the project unfolds.

Even at $175 US, the computers upend the standard economics in the PC industry. A huge reason for the low cost has been XO's use of the free, open-source Linux operating system, tweaked for this project with the help of one of its sponsors, Red Hat Inc.

The result is that XO's software and operating system has no windows or folders, but rather an interface heavily reliant on pictographic icons.

Windows compatible

However, Negroponte said XO's developers have been working with Microsoft Corp. to make sure a version of Windows can run on the machines as well. It could be the $3 US software package that Microsoft announced last week for governments that subsidize student computers. It includes Windows XP Starter Edition and some of Microsoft's "productivity" software.

Word of Microsoft's involvement was somewhat striking given that the software company and its closest corporate partner, Intel Corp., have questioned whether the One Laptop Per Child's computers will do much to stimulate educational gains. Microsoft chairman Bill Gates once denigrated the machine as not being a "decent computer." And Intel is pushing its own inexpensive computer for developing countries, the $400 US Classmate PC.

Negroponte countered that Microsoft wouldn't have bothered with its $3 US international software package and Intel wouldn't be pushing Classmate unless they had something to fear from One Laptop Per Child's innovations.

A Microsoft spokesperson could not be reached for comment. An Intel spokesman said the company has been selling in emerging markets for over 20 years and that both Intel's and One Laptop Per Child's projects working with the new class of devices began around the same time in 2005.