Linux may force Microsoft to cut prices

Microsoft has declared that it may have to slash prices to beat off the competitive threat posed by open source software.

The company made the admission in its latest quarterly filing with the Securities and Exchange Commission (SEC), warning that open source software challenges the company's commercial software development business model.

Microsoft stated in the filing: "The popularisation of the open source movement continues to pose a significant challenge to the company's business model, 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.

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

Microsoft is making its own software more accessible, in an attempt to head of the open source movement, with its recent Government Security Programme.

Under this initiative Microsoft discloses the secrets of its source code to governments and agencies to reduce security worries. Russia, the UK and Nato have already become signatories.

Last summer the Cabinet Office published a paper entitled Open Source Software within UK Government in which it declared an intention to "seek to avoid lock-in to proprietary IT products and services."

It also promised to consider open source alongside proprietary solutions in government IT procurements.

A separate challenge outlined in the filing is the European Commission's proceedings against Microsoft which allege that it has "failed to disclose information that Microsoft competitors claim they need to interoperate fully with Windows 2000 clients and servers".

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See also:

UK signs up for peek at Windows code

Another member for Microsoft's open source-style government programme  03 Feb 2003

Open source gets Cabinet approval

Report concludes public sector should adopt more OSS  24 Jul 2002

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