"This competition, of which Linux is only a part, exists at the technology level as well as in terms of business models, applications, channels, and alliances," said Ed Muth, manager of Microsoft's enterprise marketing group.
The statement is significant in light of the current trial between the Justice Department and Microsoft, which is focusing in part on whether Microsoft has a monopoly on the operating system market.
"Microsoft does see Linux as one of many competitors in the lower-performance end of the general purpose server industry and the small to medium-size ISP industry," Microsoft said in the response.
The response also addresses one of the thorniest issues of the Halloween memos, that Microsoft can attack open source software (OSS) by customizing now-public protocols, the basic rules that govern how computers talk with each other. As the first Halloween memo put it, "OSS projects have been able to gain a foothold in many server applications because of the wide utility of highly commoditized, simple protocols. By extending these protocols and developing new protocols, we can deny OSS projects' entry into the market."
The response says, "Microsoft needs to innovate above standard protocols," so the company can help customers who have needs not addressed by public protocols.
The Halloween memos featured analyses by Microsoft engineer Vinod Valloppillil that described strengths of Linux and other open source software, in which anyone can obtain the original software code.
Valloppillil praised Linux as a "best-of-breed Unix...trusted in mission-critical applications" that "poses a "significant near-term revenue threat to Windows NT Server." And because its source code is open, the operating system has "a long-term credibility which exceeds many other competitive operating systems."
Microsoft's response reiterated the company's position that the memos are "an engineer's individual assessment of the market at one point in time," not Microsoft's official position.
The Halloween memos were posted to the Web by programmer Eric Raymond, who has said a former Microsoft employee gave him the documents.
"At this point we cannot confirm how the documents were distributed outside the company or who is responsible for the action," Microsoft said in the response.