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Just as it is doing with its Windows client software, Microsoft is developing customized variants of its Windows Embedded operating system for specific markets.

The first of what could be a full line of Windows Embedded variants will be Windows Embedded for Point of Service, company officials said Monday. Microsoft is currently testing the new flavor of its Windows Embedded product in conjunction with more than 30 device makers and application vendors.

Microsoft plans to ship Windows Embedded for Point of Service by mid-2005. The company is expected to show off the latest build of the system at its private retail and hospitality developers conference in Redmond this week. The Windows Embedded for Point of Service product is part of Microsoft’s grand “Smarter Retailing Initiative” strategy, which it unveiled earlier this year.

Microsoft offers two different embedded Windows flavors: Windows XP and Windows CE. Windows XP Embedded, a subset of Windows XP, is typically integrated into retail point-of-sale terminals, thin clients and advanced set-top boxes. Windows CE is a real-time embedded operating system typically used in small-footprint devices.

Windows Embedded for Point of Service is designed to make retail peripherals — scanners, receipt printers, cash drawers and magnetic-stripe readers — to “plug and play” seamlessly with Windows Embedded.

“Point of sale isn’t just about cash registers,” said Scott Horn, a senior director with Microsoft’s mobile and embedded devices division. “It’s also about self-service kiosks, self-service check-out systems and ATMs.

“This (Windows Embedded for Point of Service) product was driven by the cost of integrating peripherals,” Horn continued. “If and when plug-and-play needs emerge in other vertical markets, we could see other (similar) Windows Embedded versions.”

Windows Embedded for Point of Service will be built on top of the Windows XP Embedded with Service Pack 2 (SP2) code. Microsoft has been beta testing XP Embedded SP2 since earlier this summer. On Monday, Microsoft made a technical preview release of this code available to beta testers. Company officials said to expect the final version of XP Embedded SP2 to ship before the end of calendar 2004.

Among the partners with whom Microsoft is testing Windows Embedded for Point of Service are Altiris, APG Cash Drawer, BSquare Corp., Fujitsu Transaction Solutions; Micros Systems, Seiko Epson, Tatung and Ultimate Technology.