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Canonical's $30 Million and Redmond's Gathering Storm

Canonical's $30 Million and Redmond's Gathering Storm

Linux's gains are Microsoft's losses, and there were both aplenty in the past week, despite the best efforts of the Redmond crowd to tamp down enthusiasm for free OSes. Bloggers across the FLOSS world are speculating over what they see as a building storm headed straight for western Washington.

By Katherine Noyes
01/29/09 4:00 AM PT

January has been an exciting month, what with all the many changes taking place around us. As the month draws to a close, however, there's a certain feeling of winter doldrums setting in, particularly for those of us being pummeled by harsh weather again and again.

Never fear! The economy may be a wreck and the temperatures polar, but there has been an extraordinary amount of good news of late for our favorite operating system. We here at LinuxInsider are here to bring it to light -- banish those below-zero blues and think freedom instead!

A Steven J. Vaughan-Nichols post on the Computerworld blogs, for example, concludes that "Being Anti-Linux Is Bad for Your Business' Health."

'It's Going to Come Back to Bite You'

Microsoft is stumbling, Vaughan-Nichols asserts, noting not only the biggest layoffs in the company's history but also that its stock price has dropped to about half of what it was last year at this time. Red Hat and Novell, meanwhile, are thriving on their Linux businesses.

More than 1,000 Diggs and 200 comments greeted that tasty bit of news!

"Well when you charge hundreds of dollars for your operating system, in times like this, it's going to come back to bite you," wrote 3242130193, for example.

'That Is Really the Lesson'

Then there was the LinuxDevices interview with Linux Foundation Director Jim Zemlin about Linux's role in Microsoft's misfortunes.

Companies "have learned that they can participate in the higher-value, higher-margin choice Linux offers, both in embedded and on the enterprise side," Zemlin told LinuxDevices. "They can offer their own branded software platform based on Linux, gaining a more direct relationship to the consumer. ... If Microsoft is getting 75 percent margins, you would like some of that high-margin business. That is really the lesson."

Slashdot bloggers made more than 500 comments on *that* cheerful lesson.

FUD in Redmond

There was also news that left a hint of egg on some Redmond faces. Specifically, citing a confidential memo from Microsoft that was used as evidence in antitrust proceedings, an article on Boycott Novell charged that a Microsoft "task force" lobbied Wal-Mart to drop GNU/Linux from its shelves.

So *that's* what happened!

More than 1,400 Diggs and 300 comments greeted that one on Digg, even as bloggers also pondered a post from CNet's Matt Asay titled "Facts Behind Microsoft's Anti-Linux Campaign."

Nothing like a chilling blast of fresh scrutiny to take the wind out of a software behemoth's sails!

Canonical's Millions

Perhaps most intriguing of all, however, was the recent New York Times article in which Canonical's Mark Shuttleworth said his company's annual revenue is approaching US$30 million -- the figure he says it needs to be self-sustaining.

That happy fact was picked up on Digg, OStatic and Slashdot, where more than 600 comments followed when bloggers pondered the question, "should Microsoft worry?"

Indeed, good question! LinuxInsider couldn't resist taking a small poll of our own.

'A Scary and Abusive Relationship'

"Canonical has a long way to go before it threatens MS Windows, but in order to delay people from switching, Microsoft will need to drop their prices for the full version," Montreal consultant and Slashdot blogger Gerhard Mack told LinuxInsider. "That, in turn, will limit Microsoft's ability to pump money into unprofitable projects. So in a way, it's more of a threat to MSN, XBOX, etc."

A milestone based on a market cap is "a totally erroneous concept," Slashdot blogger drinkypoo asserted. "The market functions not on the basis of reality, but on the perception of reality."

Microsoft has been "completely overvalued for a long time because their main asset is customer relationships, but it's a scary and abusive relationship and everyone who knows there's something better out there would like desperately to leave, if only they knew how," drinkypoo told LinuxInsider. "It's a sort of battered customer syndrome... 'But of course Microsoft has my best interests in mind!'"

'Microsoft Is Tripping Over Its Own Feet'

The simple truth is that "only Microsoft is a real threat to Microsoft," drinkypoo added. "They have tampered with all their areas of core competency, at least in business."

Office's interface, for example, "has been changed so much that only the file format lock-in is a viable argument for that product any more," he said. "Windows has been bloated beyond all belief and Windows 7 seems to allay that issue mostly by coming out at a time when the machines can actually support it."

Gaming, "an area in which Microsoft has traditionally been strong, has been hampered by the Vista-only nature of DX10 and the generally slow uptake of Vista," he said. "The Xbox 360 was rushed and has some of the worst reliability ratings of any game console ever."

In short, "Microsoft is tripping over its own feet in basically every area," drinkypoo said. "Linux is harming Microsoft, but not really responsible for any fast decline."

'The Gathering Storm'

Should Microsoft worry? "Probably not, but the gathering storm for Microsoft is about more than Ubuntu, Linux and Open Source," Slashdot blogger yagu told LinuxInsider. "It's about a company that has sown so much bad will that the gathering storm may become Microsoft's Perfect Storm, where because people need to save money, budgets, jobs and their sanity, they continue to peel off and look at fresh alternatives."

Alternatives are many, yagu asserted, "and Ubuntu demonstrates that well. So does Apple. So does a Blackberry Storm, which could replace lots of users' computer needs entirely!"

So the $30 million is "chump change to Microsoft -- they couldn't care less about that radar blip," yagu concluded. "But that blip becomes a couple of blips, and coalesces into the Perfect Storm. That's what scares Microsoft, and thankfully, that's what Microsoft isn't prepared to handle! Hey, we can dream...."

The Genie's Out of the Bottle

Similarly: "Canonical is still only a blip on the radar for M$," blogger Robert Pogson told LinuxInsider. "What worries M$ is GNU/Linux in general, which is much larger than just Canonical."

Millions of GNU/Linux netbooks were sold last year "without much help from Canonical," Pogson pointed out. "Many millions of desktops and notebooks are out there with GNU/Linux in production, being used and being seen by many. M$ has no way to put that exposure back in the bottle."

There are about 100 million users of GNU/Linux on the desktop today, he added. As the economy staggers, "M$ is afraid that number will become several hundred million in a few years. The monopoly is ended, but they desperately need to preserve the cash flow as long as possible."

'Another Lead Balloon'

To maintain its own mind share, Microsoft is licensing XP cheaply for netbooks and giving product licenses away for educational and governmental projects, Pogson charged. "To do any more they would have to pay bribes, and still GNU/Linux advances."

Windows 7, meanwhile, will be "another lead balloon, offering nothing of value to hundreds of millions of XP users, so M$'s revenue stream from the client OS will dry up," he predicted.

"A tiny quarter of 2008 caused them to announce layoffs," Pogson concluded. "What will 2009 bring? It will be interesting to watch a dinosaur try to adapt to change."

Trouble Ahead for Canonical?

And what of Canonical, we couldn't help but ask?

"It's worth mentioning that the nerdcore is starting to leave Ubuntu," drinkypoo warned. "I noticed because I had done it, and then started commenting about it, and finding that many others were finding the overall quality to have gone downhill.

"If Ubuntu doesn't start trimming the sails and stop breaking drivers in every release," he concluded, "they're going to have real problems."


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