Microsoft Chairman Bill Gates unveiled plans Thursday for a $3 software suite for students in developing countries.

The announcement marked the US software giant's most ambitious attempt to date to bridge the digital divide between technologically advanced countries and the developing economies.

The Student Innovation Suite was announced as Microsoft faces increased challenges from open source operating systems like Linux and free web-based applications like those offered by Google, both of which target the company's dominance in personal computer software.

Another threat to Microsoft is the One Laptop Per Child Project (OLPC), which aims to sell millions of its innovative units for $100 each to developing countries by 2008. Libya, Nigeria, Egypt, Rwanda and Ethiopia have already ordered millions of these laptops.

The low-cost Microsoft package includes Windows XP Starter Edition, Microsoft Office Home and Student 2007, Microsoft Math 3.0, Learning Essentials 2.0 for Microsoft Office and Windows Live Mail desktop.

Microsoft hopes the scheme will help to double the number of global PC users and bring computing to an additional billion people by 2015.

Governments in developing countries can purchase the cut-price software, if they provide free PCs for schools.

"In each country, it is tailored to the interests of the government and citizens, but it's about innovation, it's about integration, and it's about creating jobs in those regions," Gates said, speaking at the conclusion of the two-day Microsoft Government Leaders Forum Asia in Beijing.