Microsoft and Kodak have settled their differences over the way Windows XP will handle digital camera software. The former has agreed to modify XP to make it easier for users to access Kodak's software.

The Redmond giant is changing its digital camera connection options list from a drop down menu which pushed its own choice of software, to a list that takes into account the default applications provided with Kodak digital cameras.

Kodak had accused Microsoft of steering users towards Microsoft-favoured online photo processors.

Before the changes, connecting a camera through XP brought up Microsoft's Scanner and Camera wizard which displayed a drop-down list of installed software capable of accessing images on the camera. It didn't take into account camera makers' desires to use their own software as a default connection.

Kodak said its digital cameras would now work well with XP. The company's Anthony Sanzio told The Associated Press over the weekend: "We think Microsoft made significant positive changes in the operating system. They're opening up a dialogue box to let consumers see what software is available to them and that's a positive step by Microsoft."

However, Sanzio said that Kodak still has some issues with XP, although he declined to elaborate.

Kodak's partner, AOL Time Warner, has been an outspoken critic of Microsoft's bundling of new applications with its forthcoming XP operating system, due to launch officially on 25 October.