ms versus linux

["Shiv Kumaar" <shivkumar@satyam.net.in>]

Microsoft: Open source threatens our business model
Says it may have to reduce prices to combat challenge

By David  Legard
February 05, 2003

Microsoft has confirmed it sees the open-source software movement as a
threat to its commercial
business model, in a quarterly report filed with the U.S. Securities and
Exchange Commission (SEC).

The statement, appearing for the second quarter running, amplifies comments
by Microsoft Chief Financial Officer John Connors recently about the threat
of Linux to Microsoft's server business.

"The popularization of the open- source movement continues to pose a
significant challenge to the company's business model," Microsoft wrote in
its filing. "[This is] including 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."

Microsoft said it may have to reduce the prices it charges for its products,
and revenue and operating margins may consequently decline if the
open-source movement continues to gain market acceptance.

In the SEC filing, Microsoft contrasted its commercial software development
(CSD) model with the open- source movement. The financial investment in
software inherent in the CSD model benefits end-users, according to
Microsoft.

"The company believes that the CSD model has had substantial benefits for
users of software, allowing them to rely on the expertise of the company and
other software developers that have powerful incentives to develop
innovative software that is useful, reliable, and compatible with other
software and hardware," Microsoft wrote.

If Microsoft is to vanquish this threat and overcome challenges posed by a
weak global economy, it will have to offer users compelling reasons to buy
its software, the company said in its filing.

"The company's revenues would be unfavorably impacted if customers reduce
their purchases of new software products or upgrades to existing products
because new product offerings are not perceived as adding significant new
functionality or other value to prospective purchasers," Microsoft wrote in
its filing.

David Legard is an Australia-based correspondent for the IDG News Service,
an InfoWorld affiliate.