The first generation of Linux laptops ran an Intel Atom chip set. They were underpowered, but Microsoft found a way to get Windows XP on them, at $3 per copy, then Windows 7, at an unknown price, so they are less of an adjustment.
The next generation of Linux laptops will run the same ARM system used in phones, which is why Chinese makers are looking to Android, a phone operating system, as their guide.
The total hardware cost is about $20. Everything else is the case and the bling. With a 1 GHz ARM chip and $200 price point Microsoft may be unable to compete. At least for now.