Dell (DELL) is starting to install open source Linux operating systems into some of its PCs. The new products will carry prices as low as $599. Linux is generally less expensive to license than the Microsoft (MSFT) Windows OS that runs on almost all PCs. And, that may be the rub. Microsoft does not want to lose any of its PC franchise to an open source competitor. The world’s largest software company depends too much on Windows for its revenue and cash flow.
While Dell may get some pricing leverage with Microsoft, the move could backfire. Microsoft recently said that Linux violates 235 of its patents. It want royalties on the use of the intellectual property. While the immediate impact of this may be on enterprises that run Linux on a large number of their servers, Microsoft could use it as a move to keep Linux off PCs. And, given the company’s history, why not?
The Linux folks "contends that software is a mathematical algorithm and, as such, not patentable" But, proving that and winning the claim could costs tens of millions of dollars in legal fees. Microsoft can afford that fight. An open source foundation may not be able to.
Dell’s move may give it some bargaining power with Microsoft, but it could also be a tactical blunder.
Douglas A. McIntyre
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