Microsoft said it will make an announcement later today about its plans to produce a budget PC in collaboration with leading PC manufacturers.

The device is expected to be a sub-£600 Windows-based machine and will compete with Network Computers such as Sun's much-hyped JavaStation, which will be announced tomorrow. Microsoft's partners are expected to include Hewlett-Packard which has played a large role in pushing for the new computer.

Microsoft said an announcement was imminent, but Hewlett-Packard declined to comment.

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