Microsoft admits Linux threat

SEATTLE: Microsoft Corp. faces tough challenges from Linux free software and slower corporate spending on information technology, Steve Ballmer, Chief Executive of the world's largest software maker, said on Wednesday.

"In this environment of lean IT budgets and concerns about Microsoft's attention to customers, non-commercial software such as Linux and OpenOffice is seen as interesting 'good enough' or 'free' alternatives," Ballmer wrote to Microsoft's 50,000-plus employees in an internal e-mail obtained by Reuters.

Linux software can be obtained for free and copied or modified, unlike Microsoft's software. OpenOffice is a Linux-based application that mimics Microsoft's Office suite of document, spreadsheet and presentation programs.

Linux has become popular among corporations looking to lower the cost of using computer systems. "Over the long term, I'm optimistic about our growth opportunities. But we face significant challenges in the near- and mid-term," Ballmer said. "The overall state of the economy is an issue. As I talk with business customers, there is less passion and enthusiasm for technology, and greater focus on doing more for less."

Ballmer's discussion of Linux underscored Microsoft's increasing focus on the competitive threat posed by Linux. Although Redmond, Washington-based Microsoft's Windows software powers nearly all of the world's personal computers, it competes with Linux for servers that manage computer networks.

"IBM's endorsement of Linux has added credibility and an illusion of support and accountability," Ballmer said, referring to longtime rival International Business Machines Corp.'s strategy of offering Linux support and services for its high-end corporate computers.

Ballmer criticized Linux's reliance on a body of loosely-knit developers who share any features and upgrades that they make to the software. "The reality is there is no 'center of gravity,' or central body, investing in the health and growth of non-commercial software or innovating in critical areas like engineering, manageability, compatibility and security," Ballmer said.

Ballmer said Microsoft "will rise to the challenge", calling on the company's employees to improve the quality of its own software. Ballmer said that "Longhorn", Microsoft's next operating system slated for release in about two years, would be a "new applications platform enabling applications and Web sites that are easier to write, integrate better, manage information more effectively and present information in a richer, more visually compelling manner."

"Longhorn is our big bet on galvanizing the next big breakthrough - even bigger, perhaps, than the first generation Windows release," Ballmer said. Ballmer said that Microsoft Chairman Bill Gates would provide more detail about Longhorn in a memo later this year.

Microsoft has been taking other steps deal with the threat from Linux. Last month, Microsoft said it would license the rights to a rival Unix computer operating system from SCO Group, which has brought a lawsuit against IBM for including some of SCO's Unix software code in Linux. SCO has also told 1,500 of the world's largest companies that their use of Linux may be in violation of SCO's software rights.

© Reuters