Microsoft Warns SEC of Open-Source Threat

eWeek ^ | 2/3/2003 | Peter Galli

[ArcLight]

Microsoft Corp. may in the future be forced to lower its software prices as a result of the growth of open source, the company cautioned in its latest filing with the Securities and Exchange Commission. In its latest 10-Q quarterly filing, Microsoft said that the popularization of the open-source movement continues to pose a significant challenge to its business model.

This threat includes "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 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," it said.

At the root of the problem for Microsoft is the challenge open-source software presents to its traditional business model—which is based on customers paying to license its software. Under this commercial software development model, software developers bear the costs of creating the software but receive license payments for its use.

But the open-source movement has turned that model on its head. Now, software is produced by global communities of programmers, with the resulting software and intellectual property licensed to end users at little or no cost, the filing said.

Microsoft also alienated many of its largest customers with its controversial new Licensing 6 and Software Assurance program, which took effect last year.

[jimtorr]

Microsoft Corp. may in the future be forced to lower its software prices as a result of the growth of open source,

They say that as if it's a bad thing.

[b fair]

Microsoft and CNN are reporting that this is a web page hoax now.