Microsoft Sees Open-Source Threat Looming Ever Larger - Page 2

By Peter Galli  |  Posted 2004-09-05 Print this article Print

In the latest 10-k filing, Microsoft said that global software piracy was further depriving the firm of "significant amounts" of annual revenue. It also admitted that future versions of its products were competing with the current versions licensed to its installed base of customers. "This means that future versions must deliver significant additional value in order to induce existing customers to purchase a new version of our product," it said.
Microsoft also gave a detailed list of factors that could possibly affect its competitive position going forward, with Unix, Linux and other open-source software at the top of that list on the client side. "Competing commercial software products, including variants of Unix, are supplied by competitors such as IBM, Hewlett-Packard [Co.], Apple Computer [Inc.], Sun Microsystems and others.
"The Linux operating system, which is also derived from Unix and is available without payment under a General Public License, has gained increasing acceptance as competitive pressures lead personal computer OEMs to reduce costs," Microsoft officials said, adding that the Microsoft Windows operating systems also faced competition from alternative platforms, as well as innovative devices that could reduce consumer demand for traditional PCs. Click here to read about the open-source communitys attempts to defend the GPL against SCOs attacks. With regard to the competitive threat on the server and tools front, Microsoft officials said in the 10-K filing that "nearly all computer manufacturers offer server hardware for the Linux operating system. IBMs endorsement of Linux has accelerated its acceptance as an alternative to both traditional Unix and Windows server operating systems. "Linuxs competitive position has also benefited from the large number of compatible applications now produced by many leading commercial software developers as well as noncommercial software developers. A number of companies supply versions of Linux, including Novell [Inc.] and Red Hat [Inc.]," the 10-K filing reads. Microsoft also competed in providing enterprisewide computing solutions with several companies that provided competing solutions as well as middleware technology platforms. IBM and Sun led a group of companies focused on the Java 2 Platform Enterprise Edition. Commercial software developers offering competing server applications for the PC-based distributed client/server environments included Oracle Corp., IBM and Computer Associates International Inc., Microsoft officials said. But Microsoft has not been sitting idly by as the Linux and open-source software threat has grown, It has started reaching out further to the open-source community with offers of joint development and testing. It has been actively lobbying governments around the world to shun open-source applications and Linux. To that end, Microsoft in January 2003 announced a new global initiative to provide governmental agencies with access to Windows source code under its Government Security Program, designed to "address the unique security requirements of governments and international organizations throughout the world." And this January, Microsoft also launched a new advertising campaign, referred to as "Get the Facts," that aims to give customers information about the advantages of using its Windows operating system versus Linux, its open-source competitor. Click here to read more about Microsofts Get the Facts campaign. On the information worker front, the dominant Microsoft Office System also faced many competitors, including Apple, Corel Corp., IBM, Oracle, Sun, and local application developers in Europe and Asia. IBM and Corel had significant installed bases with their office productivity products, and both hade aggressive pricing strategies, Microsoft said in the filing. Next Page: Supporting older versions vs. encouraging upgrades.

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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