Microsoft Loses Munich Deal to Linux - Page 3

Microsoft also recently said that it could be forced to lower its software prices in the future as a result of the growth of open source. In its February 10-Q quarterly filing with the Securities and Exchange Commission, Microsoft said that the popularization of the open-source movement continued to pose a significant challenge to its business model.

This threat included "recent efforts by proponents of the open source model to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products.

"To the extent the open source model gains increasing market acceptance, sales of the companys products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline," it said.

Also, in an assessment of the challenges facing Microsoft, John Connors, Microsofts chief financial officer, said in a teleconference with the media and analysts last month to present the Redmond, Wash., companys third-quarter financial results, that Linux and non-commercial software remained a significant threat to the company.

That warning followed the comments by Microsoft Corp. chairman and chief software architect Bill Gates in February, when he told more than 600 of Microsofts Most Valuable Professionals (MVPs) that he took the Linux threat seriously.

Microsoft also last week took center stage in the crusade by the SCO Group to protect its Unix intellectual property, when the Redmond software firm said it was licensing the Unix source code and patent from SCO.

Responding to allegations that Microsoft was simply using the IP license as a ruse to fund SCOs campaign against IBM, which SCO is suing for $1 billion, and Linux, which it claims is an unauthorized derivative of Unix, Alex Mercer, a Microsoft spokeswoman, told eWEEK that this was "absolutely not" Microsofts intent. "There is absolutely no correlation between the IBM suit and our IP license with SCO," she said.