Microsoft on Wednesday expanded its shared-source program for Windows CE, giving device manufacturers and others permission for the first time to commercialize the custom development work they do to the Windows CE source code.

Until now, Microsoft has allowed device manufacturers, chipmakers, and systems integrators to view, debug, modify, and distribute the Windows CE code, but they were prohibited from actually selling products that incorporated the customized code. Also, only about 45% of Windows CE's code was available for those purposes.

Under the new plan, called the Windows CE Shared Source Premium Licensing Program, all of Windows CE's source code is available to third parties, and the ban on commercializing changes to Windows CE--an operating system for handheld devices--has been lifted.

"In the embedded operating-system market, the ability to extend the source code to make it specific to a device type is an important and powerful capability," IDC analyst Al Gillen says. "I think it's a positive move." Among the companies expressing support for the new program are Intel, Matsushita Electric Industrial, MIPS Technologies, National Semiconductor, Samsung Electronics, and Toshiba.

The policy change is the latest in Microsoft's 2-year-old Shared Source Initiative; this change lets outsiders not only view and modify select pieces of Microsoft's software line, but also sell products that incorporate the modified code. Microsoft recently introduced similar programs that let others modify, distribute, and commercialize Microsoft code that integrates their products with Microsoft's .Net Passport and ASP.Net. "You can resell and not pay us a license fee to resell your modifications," says Jason Matusow, Microsoft's shared-source manager.

Microsoft puts tighter restrictions on who gets access to the source code for its flagship desktop and server operating systems. Only about 65 organizations, including large business customers and some foreign governments, have access to the Windows code for viewing or debugging. They are prohibited from modifying, distributing, or commercializing the code.