Microsoft will slash prices to beat Linux

A report has claimed that Microsoft is prepared to draw from an internal slush fund to offer its software at deep discounts or...

A report has claimed that Microsoft is prepared to draw from an internal slush fund to offer its software at deep discounts or even for free as it battles against Linux for government and institutional contracts.

Thursday's online edition of the International Herald Tribune reported that in July, the then top Microsoft sales executive Orlando Ayala sent an e-mail authorising senior managers to draw from a special fund to win contracts where the company looked likely to lose against open-source Linux software.

"Under NO circumstance lose against Linux," the IHT quoted Ayala's e-mail as saying.

Microsoft representatives in the UK declined to comment on "leaked or speculated internal documents" today but did issue a statement saying that "the issues raised in the [IHT] story touch programs that the company has adopted to make technology available to customers at low prices".

At the time the e-mail was reportedly sent, Ayala was the number-three executive at Microsoft, in charge of sales and marketing, but has since been transferred to lead a new business focused on small and medium-sized companies, the paper said.

While Linux has a tenth of the desktop software market, the cheap, open source alternative does have a growing share of the server software market, and has been gaining attention with governments looking to shift to what some see as a more stable, low-cost alternative, particularly in emerging markets.

The report also details other aggressive strategies reportedly employed by the company, such as offering discounts on the hourly rates for its corporate consulting services and covertly collecting information on competitors.

If true, these tactics could, potentially, damage Microsoft's reputation further in the eyes of government regulators, which have been pursuing the company for years over its dominance in the PC software market.

Late last year, after Ayala's e-mail was reportedly sent, Microsoft finally reached a settlement with the US Department of Justice to loosen its grip on the desktop software market by sharing some source code, unbundling products and taking a more evenhanded approach to competitors.

The European Union has also been investigating Microsoft and has generally stricter antitrust laws than the US. Steep discounts given by a dominant software provider could, potentially, violate EU antitrust laws.

UK representatives for Microsoft would not comment on possible EU regulatory action in light of the report, saying only that the company continues to work constructively with the EU for a resolution of its case.

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