Windows 7 sales deal Linux a winning hand

Microsoft is making record profits, even as its hardware partners struggle to pick up the tab. Could this be a recipe for greater experimentation with Linux?

Thank heavens for Windows 7. If you're Microsoft, at least, you may be doing that.

While most of Microsoft's businesses were flat to down year over year, Windows 7 generated record profits (and units sold) for the software giant. That's great for Microsoft. It's not so great for anyone else.

Lucky 7...for Linux?

On the not-so-fortunate list: the PC makers who actually distribute Windows 7, as The Wall Street Journal reports. Windows 7 helped drive demand for new machines, but not higher prices, leaving Microsoft partners with sagging profits, according to the report.

In other words, when budget-conscious consumers and businesses bought Windows 7 machines, they paid full freight for the operating system but got their laptop/desktop at a discount. The more the Microsoft partners sold, the more they lost.

Microsoft: 1. Microsoft Partners: 0.

Historically, Microsoft has made up to 98 percent of its revenue through partners like Hewlett-Packard and Dell. It's hard to see how this would continue, if such partnerships enrich Microsoft while impoverishing partners.

Enter Linux.

Dell and other PC manufacturers have been kicking the tires on Linux for some time, but the tight economy provides an added incentive. Linux gives PC manufacturers a low-cost option at a time when consumers are already actively considering Mac OS X as a Windows alternative.

It also gives them a stick with which to beat up Microsoft on pricing. But that's a feeble threat, unless PC manufacturers seriously head down that road.

The time may be ripe. Oracle has unveiled plans to go after Microsoft's Office business with a cloud-based version of OpenOffice.org. IBM is tackling Microsoft SharePoint with its Lotus product suite.

Why not Linux? And why not now? After all, Google is kicking its Chrome OS (a Linux variant) plans into high gear. With Google waving the Linux banner, it's clearly a credible alternative to Windows--or will be. (As I discussed in early 2008, Ubuntu Linux is already super easy to use, and other Linux distributions aren't far behind.)

But PC manufacturers need not wait on Google, especially with the risk of Google introducing a laptop/Netbook equivalent running Android and Chrome to compete with PC manufacturers, just as it has done in the smartphone market with the HTC Nexus One.

Microsoft no longer feeds the computer industry the way it once did. Indeed, it might be accurate to say that it increasingly feeds off that industry. I suspect, therefore, that we'll see more of its erstwhile partners turn to Linux to boost independence and profits, even as Intel has done.

They have nothing to lose but their chains.

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