Have hackers cracked Microsoft's new Windows?

With a multimillion-pound promotional campaign, an advertisement featuring Madonna and industrial quantities of hype, Bill Gates must have thought the launch of his latest gadget would click neatly into place.

But within days of coming on to the market, hackers are already claiming to have cracked Microsoft's new operating system, Windows XP. And the worst thing is that a security feature deliberately built into the system by the company might be enabling the pirates to copy the new software for nothing.

Duncan Reid, Microsoft's UK licensing manager, said the company was still "evaluating" claims that the product had been cracked.

"We said that XP would deter casual copying. We didn't say it would stop determined pirates," he admitted.

Individual customers must buy a separate copy of the software for each personal computer on which they wish to install it. But during testing, big companies with many employees each requiring a copy of the software found that the process was too time-consuming. To make life easier for them, Microsoft provided a single "corporate key", which enables big companies to give their staff access to Windows XP rather than forcing each employee to obtain individual permission.

The problem for Microsoft is that hackers might be able to buy or steal this short-cut or "crack", allowing them to generate free as many copies of the software as they like.

John Safa, chief technology officer at BitArts Labs, a software security company based in Nottingham, said: "We have tried the cracks out on PCs here and they've been running for days without problems.

"The hackers are saying that Microsoft has basically done it to themselves, because this is a corporate 'key' – it basically converts the version of XP that you would buy in a shop into one you would use in a company by changing a few files."

The £173m marketing campaign to sell Windows XP kicked off last Thursday with launch parties around the globe. In London, Microsoft hired the Royal Festival Hall while in New York the product's unveiling took place to the sound of a free rock concert by Sting.