Microsoft is readying a slimmed-down version of Windows XP for users who want to upgrade their Windows operating systems but not their PCs.

The software, code-named Eiger, will be based on Windows XP Professional with Service Pack 2 and is designed for server-centric computing environments.

It can run on a system with a Pentium II processor, 128MB of RAM and a 500MB hard drive, a group product manager at Microsoft, Barry Goffe, said.

"There is a set of customers who have old hardware and who want to try to eke a little more value out of that hardware," he said.

The Eiger product is meant not for home users or small businesses but for large organizations that currently use older PCs with older versions of Windows, such as Windows 95, Windows 98 or Windows NT 4.0, Goffe said.

By upgrading, users will gain management features such as Active Directory and Group Policy Management. Also, the older Windows versions could be a security threat because Microsoft no longer provides patches for the operating systems. As Eiger is based on Windows XP, users will be able to plug security holes with patches supplied by Microsoft.

Eiger was being designed to run server-based applications; it wouldn't run Office or line-of-business applications locally, Goffe said.

Server-based applications could be reached through Microsoft's or third-party terminal services clients and mainframe terminal emulation, he said.

Eiger would also include Internet Explorer for access to Web-based applications and Windows Media Player, Goffe said.

For further manageability, Eiger will support Microsoft and third-party security and management products. For example, it will work with Microsoft's SMS (Systems Management Server) and WSUS (Windows Server Update Services) systems management and patching products.

"Customers are primarily concerned about security," Goffe said. "They are looking for ways to provide a more secure infrastructure. The best thing that they can do is to buy a new PC with Windows XP. However, there are customers who aren't in the position to buy a new PC."

Goffe had come across organizations in government, manufacturing, health care and financial services that would be interested in Eiger, he said. For example, one school system with 200,000 PCs would rather spend money buying text books and paying teachers' salaries than buying new PCs.

"For those customers, today there really isn't a good solution," Goffe said. "They can't take Windows XP and run it on those old PCs. It won't work. So Eiger is designed specifically for those customers."

Microsoft has not yet decided when it will ship Eiger.

The company planned to have a first beta test version ready later this year, and a technical preview version was being sent to a very small number of customers this week, Goffe said.

Pricing has yet to be determined.