Microsoft feels the threat of open source

Statements in Microsoft’s recent Securities and Exchange Commission filings show that the company considers Linux as a threat to its ability to generate revenue and hold marketshare, especially in the overseas sectors. 

According to a quarterly report filed with the SEC: “The popularization of the open source movement continues to pose a significant challenge to the [Microsoft] business model.”

The statement comes after Microsoft Chief Financial Officer John Connors told investors last month that Linux continues to threaten Microsoft’s software business.

Microsoft’s public leeriness of Linux goes back to 1998 when two Microsoft memos, now known as the “Halloween Documents,” were leaked. The documents named open source software as “a direct, short-term revenue and platform threat to Microsoft, particularly in [the] server space.” It appears that Linux is now viewed as more of a long-term threat.

The software giant says it is particularly concerned with developments in foreign governments, where a trend away from proprietary software to open source is starting to become policy. Governments in Germany and China are gravitating towards open source as a way to cut costs in government server and desktop deployments, while making their infrastructure less reliant on a single U.S. software vendor.

As a result of these developments, Microsoft stated in the filing that it may reduce its prices for its software, which could impact the company’s revenues and profit margins. Microsoft stated that its strategy to counter this trend would be to add “significant new functionality or other value to prospective purchasers.”