Linux, Open Source Remain Thorns in Microsofts Side

By Peter Galli  |  Posted 2003-07-17 Print this article Print

Microsoft officials on Thursday said Linux and open-source software remain high on its list of core threats.

Linux and open-source software remain high on the list of core threats to Microsofts business going forward. In an analyst and press teleconference to discuss the Redmond software makers fourth-quarter and full fiscal 2003 financial results on Thursday, Microsofts chief financial officer John Connors outlined the five largest risks and drivers to Microsofts business going forward. "The general economic environment is risk and driver number one, Linux and non-commercial software is risk number two. Growing new billings against a large base in a tight spend environment is number three, litigation is generally a fourth risk and, finally, executing with excellence on multiple fronts is the last risk," he said.
Acknowledging that it is facing challenges across the board, Microsoft has recently changed its staff compensation structure, shuffled staff and become far more aggressive with regard to the threat from Linux and open-source software.
Earlier this month, in a move Microsoft said would help it continue to attract and retain key staff, the company restructured the way it compensated employees. Starting in September, Microsoft will give staff actual shares in the company rather than stock options as is currently the case. The new Stock Award program will allow staff to earn actual shares of Microsoft stock over time, rather than being awarded options that give them the right to purchase stock at a set price. Redmond is also ratcheting up the pressure on its staff to improve connections with customers, increase internal efficiency and meet competitive challenges, especially those surrounding Linux, head-on. Microsoft executives are increasingly focusing on the Linux threat. In May, the German city of Munich decided to dump Windows and move to Linux and other open-source software, despite the intervention of CEO Steve Ballmer. In February, Microsoft chairman and chief software architect Bill Gates told more than 600 of Microsofts Most Valuable Professionals (MVPs) that he is taking the Linux threat seriously. In its 10-Q filing on the quarter to end-December 2002, Microsoft also said that the popularization of the open-source movement continues to pose a significant challenge to its business model. There have also been a number of end-of-financial-year staff shuffles. Peter Houston, who as the senior director of Microsofts Windows Server Strategies has had to defend and explain the companys response to the competitive threat posed by Linux and open source for the past 18 months, moved to Microsofts Enterprise Management Division, where he will work on the upcoming Systems Center product. That followed the reorganization of Microsofts platforms group, where the Developer and Platform Evangelism Business, the Windows Server System Business, and the Enterprise Storage and Management Business were combined under the existing Servers and Tools Profit & Loss center (P&L), headed by Senior Vice President Eric Rudder. Microsoft, which is also hosting a financial analyst day at its Redmond campus next week, plans to share its business and product plans in greater detail and will also revue its current capital management strategy at that meeting, Connors said.
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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