The software titan, which has no love for Linux technology and its open-source philosophical underpinnings, quickly dashed cold water on the report.
"Microsoft will not be engineering server software expressly for Linux, and continues to make its strategic bets on the Windows platform," Peter Houston, senior director of Windows Server Strategies, said in a statement.
But the rapid spread of Linux could force Microsoft's hand, said Meta analysts.
"We think Linux server stuff is going to be huge, and we don't think that's something Microsoft can walk away from," said Meta Group analyst Dale Kutnick. "We think Microsoft will (support Linux) because there are powerful economics. Microsoft is an economically driven company."
Meta also said it believes that Microsoft will re-price Windows, or separate it into new versions, so that it "can be favorably compared against 'free' Linux." This breaking-out of components would be contrary to Microsoft's longstanding practice of bundling products together to thwart competitors.
On the other hand, Meta did not expect Microsoft to begin developing Linux software, such as a version of Office for the Unix variant.
If it proves accurate, the Meta analysts' forecast would indicate a much more rapid adoption of Linux on servers than anticipated. Advances in Linux installations would put Microsoft in a defensive position. While the Redmond, Wash.-based company's proprietary software commands more than 90 percent of the market for desktop operating systems and productivity suites, dominance in the server market is less certain.
How far Linux goes in the server market--and eventually the corporate desktop arena, where it has so far had only modest success--would seem to warrant some Microsoft response, Meta concluded. Microsoft certainly takes Linux seriously. In September, CEO Steve BallmerLinux as "a serious competitor...Linux isn't going to go away--our job is to provide a better product in the marketplace."
A competitive quandary
But the software giant appears uncertain on how to handle the growing interest in Linux, according to other analysts.
"Microsoft's competition with Linux is unlike any other they've had before," said Gartner analyst David Smith. "They're not going in as the low-cost provider. Even if you buy the studies that indicate there's not that much difference in cost or that Microsoft is cheaper, at least initially people go in thinking Linux is cheaper because initially it's free."
A study from IDC last week--sponsored by Microsoft--that in the long term Windows would be cheaper to use than Linux. Kutnick agreed with that conclusion: "The difference between running Linux on Intel (processors) and Windows on Intel is negligible in terms of cost."
Meta also found that other factors, such the type of processors and applications available for these systems, will have a significant impact on "shadow IT costs" associated with Linux. In fact, the research firm concluded that because of these cost factors, until 2004, "Linux will be a larger threat to Unix--particularly Solaris--than to Windows."
Still, the perception of lower costs and the presence of the GNU General Public License (GPL) used by Linux have put Microsoft in a competitive quandary.
Smith said that Microsoft "can't use...tactics that have been successful over the years, such as bundling or tying. They're just not going to work. It's a whole new world of competition, and Microsoft can't use the same tried-and-true methods. They're struggling with how to deal with it."
Microsoft, Smith added, would like to support Linux, "if they were able to figure out a way to embrace and extend it. But I don't see how Microsoft would support Linux, unless it could pull a Java, per se."
Sun Microsystems has accused Microsoft of supporting Java, its crossplatform programming language, in a way that favored Windows only. The two companies were in court last week for three days for athat could determine whether a federal judge would compel Microsoft to carry Sun's Java Virtual Machine in Windows.
Microsoft might have taken a similar tack with Linux if not for the GPL, which would require the company to make public any source code used in the process. Company executives have sharply criticized the open-source licensing scheme.
"One of the reasons they hate the GPL so much is they can't extend and embrace Linux without burning themselves," Smith said.
But IDC analyst Dan Kusnetzky questioned Microsoft support for Linux for other reasons. The company favors Windows when developing software over other operating systems.
Meta's Kutnick didn't see that this would matter in the long run. "Microsoft isn't going to walk away from its religious principles of Windows-only easily, but more than 40 percent share of a market they want to get a handle on is difficult to pass (by). I think their principles of making money will be more important than their principles of Windows only."
Linux by the numbers
Other analysts question whether Linux's success in the server market will be as great as Meta predicts. According to IDC, Windows Server had about 49 percent market share at the end of 2001 compared with nearly 26 percent for Linux. Windows Server shipments rose about 4 percent year over year, while Linux's declined slightly.
But Kusnetzky acknowledged that the market research firm's data doesn't account for all the Linux server installations. "In the Linux numbers, we are only counting shipments that people paid for," he said. "Free replicas or free downloads are not quoted in the numbers we make available. They're only revenue shipments versus revenue shipments."
This difference could be significant, considering the Linux licensing model, which allows redistribution of the software on multiple servers at no additional cost.
Kusnetzky did agree with Meta that Linux was about to break through the early-adopter phase and into the mainstream.
"Linux took the No. 2 position in the market in 1999, bypassing both Unix and (Novell's) NetWare," he said. "We are expecting that Linux will continue in importance over time. Right now, Linux is not considered a mainstream choice by organizations in all markets. It's expected to become mainstream...probably by 2005."
Gartner's shipment data, which is more up-to-date than IDC's, shows strong gains by Linux and a modest increase by Windows.
Kusnetzky and Kutnick both saw Linux making gains in response to Microsoft tactics and pricing.
"Linux continues to be increasingly important--if nothing else, as a viable alternative when speaking to Microsoft," Kusnetzky said.
By installing Linux, he said, large companies "want to have more leverage negotiating with Microsoft. The more diverse environment they present, the more likely they are able to say, 'Give me a discount or I'm going over there' and be believed."
"We see a backlash against Microsoft in some respects, which is why we see some people going to Linux," Kutnick said. "There's some from licensing, and there's a perception from some governments and countries that Microsoft is a monopoly. They want an alternative. Linux is gaining in popularity particularly in Asia, for example, where (companies) want more control of their destiny."