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Paper: Microsoft discounts against Linux

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AMSTERDAM (Reuters) -- Microsoft has a strategy to discount its products heavily when the software giant competes for orders against the emerging license-free Linux operating system, the International Herald Tribune newspaper said on Thursday.

The newspaper said that according to internal Microsoft emails it obtained, Microsoft's chief sales executive Orlando Ayala authorized executives to offer steep discounts.

"Under NO circumstances lose against Linux," Ayala was quoted saying by the newspaper, adding the discounts could be paid for by a special fund.

No-one at Microsoft was immediately available for comment.

Microsoft is the dominant operating software on desktop computers around the world, while it is pushing into the market for more powerful and expensive computers. A range of Microsoft rivals are promoting Linux as a cheap alternative to Microsoft's Windows.

The discounts cash-rich Microsoft is said to be offering may put further pressure on the world's largest software company, which is under investigation by European market regulators for abusing its market dominance.

Governments and organizations in many countries are interested to use Linux on desktop computers, which is already a successful rival to Unix and Windows in server computers, used to power Web sites and corporate software.

"Governments in the Asia Pacific region and several in Europe and South America are encouraging government departments and enterprises to consider alternatives to Microsoft," said the editor in chief at market research group Gartner.

Germany using Linux

The German Interior Ministry has started replacing desktop computers and servers with IBM machines running Linux.

Linux software runs 15 percent of all servers sold in Western Europe in 2002, compared with 56 percent of servers running on Windows, according to research group IDC.

But just as Microsoft changed the computer industry 25 years ago when it started selling operating software as a separate product, Linux is changing the game again, analysts said.

"Linux software is owned by the software community. For Microsoft that's a very hard fight. If it says it doesn't want to lose against Linux, that's a statement against the community," said analyst Martin Hingley at IDC.

Linux is being distributed by hundreds of companies, which are not allowed to charge for the core software, but which do charge for modifications, services and maintenance.

A research report paid for by Microsoft earlier this year concluded that over a longer period there was no cost advantage over Windows when running computers on Linux. Maintenance and support for Linux would sometimes be higher than Windows.

"Linux is everyone's favorite operating system, but it's relatively immature, plus software development by community takes a lot of time," Hingley said.

Gartner analyst Robin Simpson added: "Enterprises must be careful not to view Linux as a panacea. Although in some situations Linux may be appropriate, on the desktop it isn't always less expensive or easier to manage then Microsoft operating systems and applications."

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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