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Wed, May 21, 2003 - Page 12 News List

Linux overshadows Microsoft's annual government forum

AP , SEATTLE

It doesn't top the official agenda, but as government leaders converge at Microsoft Corp for an annual conference, one of the company's major competitors -- Linux -- is likely to be on executives' minds.

Microsoft had representatives from 61 countries Monday and yesterday at its Redmond, Washington, campus for its annual Government Leaders Summit.

But with the disclosure that Microsoft has been using a fund to steeply discount its software to government agencies that are considering competitors' cheaper products, the Linux phenomenon will doubtlessly come up.

Also Monday, Microsoft announced a new deal to license UNIX technology from SCO Group. The move is seen by Microsoft detractors as a bid by the software giant to undermine the Linux operating system, a Unix offshoot, as a competitor.

Last week, SCO sent letters to Linux customers claiming the software is an "unauthorized derivative" of its property.

At the conference, Microsoft will tout the message that there's more to software than just its upfront costs. However, it's clear the company will accept huge discounts to ensure it does not lose the lucrative government and educational market.

"Where there are competitive options, Microsoft is often willing to go to the mat to make sure they get a deal," said Michael Gartenberg, research director for Jupiter Research.

The summit will focus on such topics as technology and its role in driving economic development, the delivery of government services over the Internet and Microsoft's vision for where technology is heading, said Brad Smith, Microsoft senior vice president and general counsel.

But the summit comes amid a struggling global economy and the increasing popularity of the free Linux open-source software -- in which big-name vendors like IBM are creating and selling lower-cost software.

In recent months, government agencies from Germany to France to Peru have adopted or are considering Linux-based software as a cheaper alternative to Microsoft products.

To counter that, Microsoft last July established the Education and Government Incentive program, which allows the company to steeply discount software for government and academic agencies, Smith said.

The threat to Microsoft is clear from an e-mail last year by Orlando Ayala, then Microsoft's worldwide sales chief.

Ayala wrote, "Under NO circumstances lose against Linux before ensuring we have used this program actively and in a smart way," Smith told reporters. The company declined to share the full e-mail.

The program is geared mostly for developing countries, where agencies may be less able to afford Microsoft software, Smith said.

He brushed aside concerns that Microsoft may be using its massive cash hoard -- more than US$40 billion -- to discount products unlawfully or in other ways that violate EU laws.

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