Microsoft said it plans to cut prices of its Windows Vista operating system sold at retail outlets in a move aimed at pushing customers to switch to the newest version of Windows.

The world's largest software maker said it plans to lower retail prices for Vista in 70 countries later this year in tandem with the shipment of the first major update to Vista, known as Service Pack 1 (SP1).

Packaged versions of Windows Vista sold at stores and on the web account for less than 10 per cent of all licences of the dominant Windows operating system that sits on more than 90 per cent of the world's personal computers, sources said.

Most consumers opt to buy a new PC, which comes preloaded with the latest version of Windows.

'We anticipate these changed will provide greater opportunities to sell more stand-alone copies of Windows,' said Brad Brooks, a Microsoft corporate vice president.

In the US, Microsoft will reduce prices for Windows Vista Ultimate, the company's top-end operating system, to $319 from $399 for the full version and cut the price for an 'upgrade' version to $219 from $259 for consumers who already run Windows XP or another edition of Vista.