Microsoft has long been worried about Linux competition in the server market. When it came to ordinary PCs and laptops, however, it knew it had little to fear.
Let me explain.
The threat to Windows comes entirely from "netbooks" - lightweight, inexpensive laptops that typically use Intel 's low-powered Atom processor and don't come with substantial amounts of RAM or powerful graphics processors.
They're designed mainly for browsing the web, handling email, writing memos, and taking care of simple word-processing or spreadsheet chores.
Netbooks will account for about a third of all PC growth this year, according to Citigroup. Shipments will rise at an annual average rate of 60 percent to reach 29 million netbooks in 2010, compared with 18 percent growth for standard notebooks, says a September BNP Paribas report.
Clearly, the future is in netbooks. And that has Microsoft worried. Netbooks can't handle Windows Vista's hardware demands, so XP is the only Microsoft operating system that runs on them. But Linux is ideally suited for lower-powered netbooks.
The result? Acer and Asustek, which account for 90 percent of the netbook market, are using Linux on about 30 percent of their low-cost notebooks, according to Bloomberg. Making matters worse, if Linux is used on those netbooks, it means that Microsoft Office isn't. So Microsoft takes a double hit every time someone buys a Linux netbook.
Microsoft isn't just worried about ceding 30 percent of the netbook market to Linux. It's also worried that if people get used to running Linux on netbooks, they'll consider buying Linux on desktop PCs as well. Here's what Dickie Chang, an analyst at IDC in Taipei, told Bloomberg: "It's a real threat to Microsoft. It gives users a chance to see and try something new, showing them there is an alternative."
Microsoft, though, has a not-so-secret weapon against Linux: Windows 7. Its new operating system, slated to be introduced sometime next year, is designed to work fine on netbooks. In fact, at Microsoft's recent Professional Developers Conference, where the pre-beta of Windows 7 was unveiled, Windows Senior Vice President Steve Sinofsky showed off Windows 7 on his Lenovo S10 and said it used less than half of the netbook's 1GB of RAM.
In fact, the blitz has already begun. Asus CEO Jerry Shen announced that he plans to release versions of the Eee PC powered by Windows 7 in mid-2009, including a touchscreen version.
This is anything but a level playing field. Because no company owns Linux, there won't be a competing marketing push for Linux netbooks. Microsoft has shown before how tough it can be on competitors - remember Lotus 1-2-3, WordPerfect and Harvard Graphics? So expect Linux netbook sales to fall when Windows 7 ships.
Despite Microsoft's killer instincts, I don't think Linux netbook sales will stop dead. There will always be a niche for them. But within a year of the Windows 7 launch, Linux market share will drop. The high point for Linux netbook sales will be from now until the launch of Windows 7. After that will come the inevitable decline.