Microsoft to offer Windows 7 for netbooks

Chief Executive Steve Ballmer, speaking at an analyst meeting in New York on Tuesday where he painted a grim outlook for the economy, also said he still wants to team up with Yahoo Inc to compete with Internet search giant Google Inc. He added that acquiring Yahoo is not on his agenda.

Ballmer said about 90 percent of netbooks -- small notebook computers generally priced at $200 to $400 -- have been shipped with Windows XP. While most netbooks currently run on a stripped-down version of Windows XP, Windows 7 was designed to work fully on the inexpensive laptops, he said.

Buyers of netbooks with the low-end version of Windows 7 will have the option of upgrading to the more powerful versions, Ballmer said.

Analysts expect Windows 7, which will replace the unpopular Windows Vista, to be released before the year-end holiday shopping season. Microsoft, the world's No. 1 software maker, has declined to give a specific release date.

Ballmer also said he expects Google to offer a version of its Android operating system that currently runs on mobile phones for laptop computers, which will put it head-to-head with Windows.

(Reporting by Jim Finkle, editing by Matthew Lewis)