The trouble started when Paul Thurrot's WinInfo newsletter reported that developers connected with Microsoft partner Mainsoft said they had been working secretly on Office for Linux.
Microsoft quickly countered with a denial and had Mainsoft issue a press release rebutting the report.
But the story is not that simple.
Whether there is a kernel of truth to the rumor remains a mystery, but one thing is certain: Mainsoft and rival Bristol Technology are the only two Unix and Linux developers with access to Windows source code and thus the capacity to undertake such a project. Both are porting other Microsoft products, such as Internet Explorer and Windows Media Player, to various flavors of Unix and are filling an important niche between Windows and competing operating systems.
But Thurrott and industry analysts are convinced Microsoft is developing a version of Office for Linux. If not, they say, the company is blundering down a dangerous path that could conceivably jeopardize its most important product line.
The controversy began when Thurrott revealed conversations he had with software developers in Israel the previous week. The developers in question worked for or with Mainsoft.
"They basically said they had been working on (porting Microsoft applications to Linux) for over a year and that they had very little success," he said. "They had some success with getting some programs running, but when they tackled Office, so far it had been pretty much unsuccessful."
Thurrott said one of developers told him Microsoft plans to leverage Office for Linux the same way it does Macintosh Office and is not preparing a contingency plan should Linux overtake Windows.
Microsoft quickly countered the WinInfo report.
"It's absolutely not true," Microsoft spokesman Jim Cullinan said. He pointed out that Mainsoft had worked on "porting" some Microsoft products to Unix, "but it has nothing to do with Linux."
By Thursday of last week, Microsoft had encouraged Mainsoft to issue an official denial, said sources familiar with the matter. The same day, Cullinan reaffirmed his company's position. "It is also my understanding the person who started this has stepped back and restated his position."
"I wouldn't say I recanted," Thurrott said. "Microsoft called and asked me to recant the story, but I talked to these developers, and I didn't go to Israel looking for a story. It just sort of fell into my lap. I believe Microsoft is working on (the project), although it may never see the light of day."
Speaking of Unix
Both Mainsoft and Bristol were reluctant to talk about their Linux relationship with Microsoft, referring inquiries back to the Redmond, Wash.-based software giant. They were, however, more forthcoming about Unix.
Mainsoft, for example, last week announced its technology would be used to port Internet Explorer to Unix and Windows Media Player 6.3 to Solaris.
Bristol CEO Keith Blackwell carefully worded his company's position: "We do support Linux, as does Mainsoft," he said. "We support the functionality equally across Linux and Unix, so we do have customers that are porting to Linux."
Mainsoft chief executive Yaacov Cohen took a similar tack. "We have a Unix relationship with Microsoft. They have been very supportive."
Both companies offer tools developers can use to port Windows applications to Unix or Linux. Professional services divisions also do the work for companies lacking the resources or initiative to tackle the task.
The companies also license source code, which is essential for getting Windows programs to run on Linux. "You really need Windows source code to be able to maintain the compatibility between Windows and Linux," Blackwell said.
"There are about 7 million lines of Windows code embedded in our product," Yaacov said.
Dataquest analyst Chris LeTocq said this source code would be essential to running Windows programs on either Unix or its open-source cousin, Linux.
"Every time Microsoft ships Office, it ships a chunk of operating system code. These two products are substantially intertwined," he said.
That interdependency means Microsoft must make source code available to companies like Mainsoft and Bristol that are developing porting tools, he said.
Microsoft's reasons for resisting moving to Linux are obvious, analysts say.
"If Microsoft markets Office for Linux, it legitimizes the platform and encourages a platform where Microsoft is not as strong and definitely would threaten their major revenue producer, Office for Windows," LeTocq said.
Office accounts for 46 percent of Microsoft's revenue, making it the company's most profitable product line.
Analysts' projections don't show Linux being enough of a threat to Windows to warrant a supporting version of Office, either. Research firm International Data Corp. found that while Linux poses a serious threat to Windows on servers, its impact on desktop PCs is minimal.
Linux took the No. 2 server operating position from Novell Netware and continues to gain steadily on Windows NT and 2000, expected to grow about 28 percent a year through 2004. But in some overseas markets, Linux growth is greater, growing more than sixfold in Japan.
On the desktop, however, where Office is the leading productivity application, Windows dominates, with 87 percent market share in 1999 and a projected 85 percent in 2004.
Though Linux poses no immediate threat to Windows, two scenarios could change Microsoft's position regarding Office: the government succeeding in breaking up Microsoft or China moving to Linux, as it has threatened to do.
Trials at home and abroad
In June, a federal judge ruled that Microsoft should be broken into separate operating system and software applications companies to comply with U.S. antitrust law. If the company should lose its appeal and become two companies, the group with Office would have more reason to develop a version for Linux.
"If they become two companies, Office for Linux becomes more imperative, because it's every man for himself and no holds barred," IDC analyst Roger Kay said. "Linux would be one of the prime potential markets for them."
Microsoft's more immediate problem is China, something the company cannot afford to ignore, analysts say.
"From Microsoft's perspective, what if China says, 'Linux is the way to go--end of story'? Microsoft would need to have something and immediately," LeTocq said. "Otherwise they could cut off Office from a critical market."
Reports of China potentially favoring Linux over Windows have been persistent. While China denied it would ban Windows 2000, the country, and others, may have good reason for favoring Linux over Microsoft's operating system.
"China, Russia and India are scared to death of some security back door in Windows," said Bob Bishop, chief executive of SGI. "But with Linux, they have the source code and can see there are no back doors."
A security flaw discovered about a year ago raised questions about whether Microsoft had placed a special encryption key, known as NSAKEY, enabling the National Security Agency back-door access to Windows. While the agency and Microsoft denied the allegations, some foreign governments might have reason to remain skeptical, Bishop said.
Then there is the issue of control. Countries like China and Russia committing to open-source Linux, which is free and not bound to a single U.S. company, would gain more control developing and securing server software.
Looking at the situation overseas, Microsoft has good reason to consider developing a version of Office for Linux, Le Tocq said.
"If I was at Microsoft, I might well do a contingency effort with Office for Linux," he said. "From Microsoft's perspective, that's a large portion of their revenue. If I were at Microsoft, that's a card I'd want in my back pocket. I might never play it, but I'd want it."
News.com's Michael Kanellos contributed to this report.