Lindows.com, which sells an operating system designed to compete with Windows in the consumer PC market, is sticking by its original announcement of an "AOL computer", despite AOL Time Warner's claim that the way the deal was described was "misleading".

AOL last week distanced itself from the Lindows PC, saying "AOL has nothing to do with it", and saying that Lindows.com had only filled out a one-page form allowing it to distribute the Netscape 7.0 browser, something it has in common with more than 70,000 other organizations.

On Thursday, however, Lindows suggested that AOL might not have its facts straight. "Our engineers have been to Dulles, Virginia, and have worked with AOL," said Lindows' public relations director, Cheryl Schwarzman. "It may be the case that the spokesperson was not informed of that information."

In response, AOL reiterated that it has "no formal relationship" with Lindows.com. The spokesman said he had "no knowledge of their people working with ours."

The dispute arose after Lindows.com announced a deal to incorporate AOL Time Warner's Netscape 7 browser as default into Lindows 2.0 and to include tools allowing users to access AOL email and instant messaging services. The deal was widely reported as an alliance between two foes of Microsoft.

Lindows suggested the term "AOL computer" for such PCs. The company is promoting the AOL functionality as a major selling point for $200 (about £128) Lindows 2.0 machines being sold in the United States through Wal-Mart's Web site. "Many (AOL) customers will be motivated to purchase their own 'AOL computer', especially now that users can pick up a LindowsOS system for under $200," Lindows.com chief executive Michael Robertson said last week.

Wal-Mart sells a Microtel PC sporting the Lindows OS for $199.86 on its Walmart.com Web site. The company also sells computers running Windows XP and Mandrake Linux, and PCs without operating systems.

The AOL and Netsape functions are available on many other operating systems, including other Linux distributions and on the Mac OS. Lindows.com noted that users cannot currently gain access to the main AOL service, only email, instant messaging and the AOL Web site. Lindows.com is working on customizing the Windows version of AOL 7 for Lindows using Windows simulation technology.