Users found their computers endlessly rebooting after the update from security firm McAfee confused a Windows file for a virus.

Hospitals, universities, businesses and other non-domestic users of Windows XP were apparently hit by the fault on Thursday.

McAfee quickly released an update to fix the issue, but the damage to their reputation was already done, analysts say.

"It is not often that a security vendor takes out a large number of their clients," said Rob Enderle of Enderle Group in Silicon Valley.

"Customers don't forget this stuff any time soon. This is going to hurt McAfee," he added.

The Internet Storm Centre, which monitors the web for problems, had reports of "networks with thousands of down machines and organisations who had to shut down for business until this is fixed".

Yet McAfee said it was not aware of a significant impact on consumers.

"We believe that this incident has impacted less than one half of one percent of our consumer base and enterprise accounts globally," a company statement said.

But one technology blogger was less convinced. Ed Bott tweeted: "I believe McAfee's statements on this issue are composed of equal parts BS (b******t) and CYA (cover your a**). Spun, not stirred."

Hackers added insult to injury by tricking users into visiting fake websites offering fixes - but those who took the bait had their computers infected with viruses designed to steal sensitive information.

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