Microsoft has acknowledged for the first time, that linux is a direct threat to the Windows client, naming Red Hat and Canonical (Primary sponsor of Ubuntu) as competitors to it's Windows client business in it's annual report to the U.S. Securities and Exchange Commission.
As stated in the filing by Microsoft, "Client faces strong competition from well-established companies with differing approaches to the PC market, competing commercial software products, including variants of Unix, are supplied by competitors such as Apple, Canonical, and Red Hat."
The acknowledgment of this points out that linux has finally gained ground, and that it now puts up a viable fight against the Windows client. Microsoft is attributing this to the growing trend of netbook PC's - ultra low-powered notebook pc's that are mainly used to surf the internet.
Microsoft notes that Linux has gained what Microsoft tries to attribute as "some acceptance" as an alternative OS to Windows, in particular in "emerging markets" where "competitive pressures lead OEMs to reduce costs and new, lower-price PC form-factors gain adoption." Microsoft also makes mention in the report that Linux was originally not a viable desktop OS competitor for Windows, but now has become one.
The report goes on to point out that even it's own OEM partners, including Hewlett-Packard and Intel are now providing support for Linux, something which was previously unprecedented.
Rob Helm, director of research for the direction of Microsoft wrote: "Netbooks opened Microsoft to the possibility that some other OS could get its grip on the desktop, however briefly, now it's alert to that possibility going forward." Helm also mentions that "Microsoft would like the netbook to go away and be replaced by lightweight laptops -- ones with long battery life that cost enough to justify running full Windows on them".
Before this report was filed, Microsoft only noted viable competition from Red Hat to it's server business - the Windows Server family, in it's yearly reports.
Microsoft's previous Windows client release, Windows Vista was too resource heavy for netbook PC's and was not used, but instead, Microsoft's 8 year old desktop OS, Windows XP was widely used on netbook PC's, for it's speed and stability. With Windows 7's release on October 22nd, will come a SKU geared specifically towards "low powered" notebooks, called "Windows 7 Starter Edition".