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By Peter Galli  |  Posted 2003-02-03 Print this article Print

: Microsoft Warns of Open-Source Threat"> And in a controversial client advisory released last month in which Meta gave its current analysis and five-year forecast for Linux and its impact on the IT landscape, the firm said its research indicated that Linux currently commanded between 15 percent and 20 percent of new server operating system shipments, but that by 2006 or 2007, Linux on Intel, or Lintel, would be on 45 percent of new servers. Microsofts latest 10-Q filing shows that its financial fortunes continue to lie squarely with its Windows client, Office desktop productivity and server platforms—all of which are being aggressively targeted by the open-source development community.
Microsoft is also bringing new server and Office offerings to market this year, which it hopes will help drive sales momentum. Windows Server 2003, the upgrade to Windows 2000 server, will be released on April 24, while Office 11 is slated for release by the end of June.
The latest 10-Q filing shows that in the quarter, ended December 2002, those three business units generated some $4.346 billion in operating income. But that was offset by $1.087 billion in operating losses from Microsofts Business Solutions, MSN, CE/Mobility and Home and Entertainment businesses, as well as reconciling amounts—which includes state revenue and operating income adjustments and corporate level expenses not attributed to any one segment. On the positive side, Microsofts Windows-based client business generated $1.965 billion in operating profit on the back of $2.435 billion sales revenue for the quarter. The Information Worker segment of its business, which includes Office, Project, Visio and SharePoint Portal Server, generated $1.883 billion in operating income on revenue of $2.411 billion; while its server platforms business garnered $498 million in operating income on revenue of $1.665 billion. In contrast, its Home and Entertainment unit, which includes the Xbox video game system, its other PC games, consumer software and hardware and TV platform, turned in an operating loss of $348 million in the December quarter, with the MSN subscription and network services unit reporting an operating loss of $157 million and reconciling amounts coming in at a $450 million operating loss. Microsoft also cautioned in the SEC filing that while it had made significant investments in research, development and marketing for new products services and technologies, including Microsoft .Net, Xbox, MSN and wireless and mobile technologies, "significant revenue from these investments may not be achieved for a number of years, if at all. "Moreover, these products and services may never be profitable, and even if they are profitable, operating margins for these businesses are not expected to be as high as the margins historically experienced by Microsoft," it said. That sobering outlook follows the bleak picture of the global economy painted by Microsofts chief financial officer John Connors, in presenting the companys second-quarter financial results last month.
  • Read more articles by Peter Galli
  • For more Microsoft scoops, check out Ziff Davis Microsoft Watch

    Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

    He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

    He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

    He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

    He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

    He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

    His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

    For numerous examples of his writing you can search under his name at the eWEEK Website at


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