It's Windows vs. Windows as Microsoft battles piracy

In effort to up sales of Windows, firm has sights set on nearest rival: Not Linux, not the Mac--Windows itself.

In an effort to boost sales of Windows, Microsoft has its sights set on its nearest competitor.

But it's not Linux. And sorry, Apple Computer fans, it's not the Mac.

The biggest rival to Windows sales is Windows itself--or rather pirated copies of the OS. And Microsoft is starting to put its foot down.

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What's new:
Microsoft is beginning to crack down on unauthorized versions of Windows by forcing people to authenticate their OS before getting security patches and other updates.

Bottom line:
The move has the potential to boost revenue for Microsoft, but it could push some people toward Linux and it adds some security risk for legitimate users.

More stories on Microsoft and piracy

In its most serious bid yet to reap revenue from those who've been getting Windows without payment to Microsoft, the company plans to require computer owners to verify that their copy of Windows is properly licensed before allowing them to download software from Microsoft's site. By mid-year, the once voluntary Windows Genuine Advantage program will become mandatory.

Those with unlicensed copies of Windows will be blocked from getting both add-ons to the OS and security patches through Microsoft's download site (though they will still be able to use the Automatic Update feature built into Windows).

"They've let it go until now because PC growth has been so good," said Matt Rosoff, an analyst at research firm Directions on Microsoft.

But that's begun to change.

Sales of Windows have started to lag those of the PC market as a whole. The issue has become more acute as an increasing amount of the growth in computer shipments is coming from emerging markets, where piracy is far more prevalent.

Analysts agree that cracking down on unlicensed copies of Windows is one of only a few ways Microsoft can grow the business, which is a key generator of profits. But they also point to significant risks involved in taking a harder line.

Historically, Microsoft has trod carefully when it comes to crackdowns, particularly in emerging markets. Though clearly eyeing growth, the company has not wanted to push too hard in countries where piracy is rampant, and thereby force customers toward Linux. Also, some say that by threatening to withhold security updates, Microsoft is making the entire Internet less secure, harming legitimate customers as well.

In an effort to placate that concern, Microsoft will allow those with unlicensed copies of Windows to continue getting security patches by turning on Windows' Automatic Update feature.

Despite the risks, though, the potential increase in sales by cracking down on piracy is hard for Microsoft to ignore.

Piracy is a big problem for the software maker--one that has cost it billions of dollars in recent years. Last quarter, for example, Microsoft saw revenue in the Windows client unit grow by 5 percent, but PC shipments grew more than twice that fast. Until this year, the client unit had been growing its revenue at a compounded growth rate of 12 percent. Any slump in the Windows client business is cause for concern: Last quarter, the unit accounted for $2.5 billion in profits--more than half of the company's total $4.7 billion earnings.

In a presentation to financial analysts last summer, Will Poole, head of the Windows client unit, identified a reduction in unauthorized use of Windows as a key growth opportunity for the business. He mentioned it alongside efforts like Tablet PC and Media Center, which are

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