In August 2009, Microsoft named the Linux distributors Red Hat and Canonical as competitors to its Windows client business for the first time. The disclosure was in its annual Form 10-K filing to the US Securities and Exchange Commission for the fiscal year ended 30 June 2009. Canonical maintains the Ubuntu distribution.
The filing implicitly acknowledged that Linux on netbooks, the small low-cost notebooks then gaining ground against full-sized laptops, had become a viable competitor on the desktop.
What the filing said
Microsoft’s earlier 10-K reports had cited Red Hat only as a rival to its Server and Tools business, which includes Windows Server. The 2009 filing extended the competitive list to the client side. It said Windows client faced strong competition from established companies with different approaches to the PC market. It listed Apple, Canonical and Red Hat as suppliers of competing commercial software, including Unix variants.
The filing also said Linux had gained “some acceptance” as an alternative client operating system. It tied that to emerging markets, where pressure on PC makers to cut costs and the arrival of cheaper PC form factors were driving adoption. That wording was widely read as a reference to netbooks. The filing also mentioned the efforts of Microsoft’s own partners, Hewlett-Packard and Intel, to support Linux on PCs.
Netbooks and the analyst view
Rob Helm, director of research at Directions on Microsoft, said in 2009 that netbooks had opened Microsoft to the possibility that another operating system could take hold on the desktop, even briefly. He said the company was now alert to that risk.
Helm argued that Linux on servers was well established among business customers, but that it had never taken off as a Windows alternative on PCs until netbooks arrived. In his view Microsoft wanted netbooks to give way to lightweight laptops with long battery life. Those machines would be priced high enough to justify full Windows. He said cheap machines on which Windows was the costliest component were a problem for Microsoft, because they could pull down the price it could charge for Windows.
The filing was brought to wider attention by Seattle blogger Todd Bishop, who wrote about it on the TechFlash Microsoft Blog and linked to the document.
Where Windows stood on netbooks
Windows Vista, Microsoft’s client system at the time, had too large a hardware footprint and was too expensive for netbooks. That gave Linux an opening when the category emerged in late 2008. Windows XP, then eight years old, nonetheless remained the dominant netbook operating system in 2009. Microsoft planned a Starter Edition of Windows 7, due that October, aimed at the same market.