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Thursday, November 02, 2006

Microsoft And Linux: Keep Your Friends Close And Your Enemies Closer (II)

Stocks: (MSFT)(ORCL)(RHAT)(NOVL)

It was said that it would never happen. Linux, the open source operating system, is the greatest enemy that Microsoft faces in it attempt to keep its software franchise worldwide.

Today, Microsoft entered into a deal with Novell to distribute Suse Linux, a version of the Linux software. Under the arrangement, both companies will promote the ability of computers to run Windows OS and Suse Linux. Microsoft will also refrain from any attempt to get an IP judgement against any portion of the Linux software. Whether there are infringement issues is not known.

The obvious reason that Microsoft might do this is that its rival, Oracle, is promoting another version of Linux from Redhat. Microsoft is simply flanking them.

But, there may be another reason. By promoting systems to run both Linux and Windows, it means that it is less likely that Windows will be excluded in place of the more economic Linux products. Microsoft may also be guarding against antitrust moves by Redhat, It may seem perverse, but it is the Microsoft way.

While it was supposed to never happen, we have discussed instances where Microsoft was loosening its grip for more opening up of the systems so long as they get to be the software and platform king.

My partner, Jon Ogg, said regarding this, "If this Linux initiative is as wide as we hope for, this will essentially assure Microsoft's relevance as the software provider of choice in the years to come. They have made several telegraphed initiatives that have gotten us this far to this announcement today. It may require putting on some rose-colored glasses and you may need to take this a few steps further down the road to come to the same conclusion, but this will create a solidarity for the future with Microsoft as the continued brand leader rather than the old ancient leader who lost control."

On July 18, 2006 we noted in "Windows AND Linux" where Microsoft had a release with XenSource.

On August 22, 2006 we noted in "Two Microsoft Issues: Open Source and Vista Timing" that the company inviting the Mozilla Firefox team could be a precursor to this.

Microsoft's Steve Ballmer will be hosting a press conference today in San Francisco at 2:00 PM PST, or 5:00 PM EST.

Douglas A. McIntyre
November 2, 2006

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
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