UPDATE 1-Windows works well on One Laptop Per Child machine

(Adds comment from Negroponte, background, byline.)

By Jim Finkle

BOSTON, April 23 (Reuters) - Microsoft Corp's (MSFT.O: Quote, Profile, Research, Stock Buzz) Windows software works well on the One Laptop Per Child Foundation's XO Laptop, the group's founder said in an e-mail posted on his group's website Wednesday.

Nicholas Negroponte also said that, after several months of discussions with the world's largest software maker, his foundation plans to adapt its Sugar software package, which runs the XO Laptop, so it is compatible with Windows.

Sugar was designed only to work with a version of the Linux operating system that engineers from Red Hat Inc (RHT.N: Quote, Profile, Research, Stock Buzz) helped the foundation develop.

"Sugar needs a wider basis," Negroponte said in the email.

Microsoft's success in developing a version of Windows that works on the XO ensures it will not miss out on a chance to expose its operating system to the millions of grammar school children who Negroponte hopes will one day use machines made by his foundation.

In October, Microsoft Corporate Vice President Will Poole told Reuters the company was spending "a nontrivial amount of money" on adapting a basic version of Windows so it would be compatible with the XO laptop.

Now the nonprofit group and Microsoft plan to develop a version of the XO that runs both Windows and Linux software, Negroponte said in his email.