Showdown On the Desktop By Stephen Cass and Prachi Patel Predd

Microsoft's PC software faces new rivals that will be too big to ignore

Illustration: Michael Kupperman

After dominating the desktop PC for a generation, Microsoft Corp. has at last come under serious attack—and from three directions.

The first assault on the Redmond, Wash., company comes from the open-source operating system Linux, long a competitor in such back-end applications as file servers. Now, however, some organizations are pushing Linux down the funnel to the personal computers of their employees.

One reason is that licensing costs are low, because Linus itself is free, says Bill Weinberg, a spokesman for the Open Source Development Labs (OSDL), in Portland, Ore., which fosters the development of Linux. Another is the ability of Linux to run on old hardware that would spurn Microsoft Windows. "Typically, Linux allows enterprises to delay hardware upgrades for two years," he says. Also, Linux is more convenient than Windows for managing a large number of computers from a remote location.

IBM Corp., a sponsor of OSDL, has started a pilot program to use Linux on the desktop. So far it has gone only to developers and others who need Linux for their jobs, but the program is "thriving," says Nancy Kaplan, an IBM spokeswoman in Somers, N.Y. In the United Kingdom, IBM and Sun Microsytems Corp. have participated in pilot programs for the Office of Government Commerce, which released a report in October concluding that open systems were "a viable and credible alternative [for] the majority of desktop users."

Linux has had less success in the home market, in part because it doesn't run many familiar applications, notably games. But if enough people start using the system at work, home applications will presumably follow.

A recent survey commissioned by OSDL and conducted by IDC, Framingham, Mass., estimated that Linux will move to 17 million desktops by 2008, up from 7 million in 2005. That would bring revenues of US $10 billion to companies that make Linux-friendly hardware and support it with software and customization services. By comparison, Windows currently runs on some 570 million desktops.

Microsoft professes not to worry. "We see Linux receiving a lot of publicity...but ultimately very few deployments," said Tina Austinson, a spokeswoman for the company.

The second challenge to Microsoft came in January, in the form of a 15-centimeter-square, 5-cm-high box called the Mac Mini. Microsoft's old foe, Apple Computer Inc., in Cupertino, Calif., sells the box for just $500 by itself—and it's just fine by itself, now that most prospective users already have monitors, keyboards, and other peripherals. More important than the low price is the added security offered by the Unix-based operating system, which resists the many viruses, worms, and spyware that were written with Windows in mind.

"Lots of people who haven't bought a Mac before are buying it," said a manager at a busy New York City branch of CompUSA, a national retail chain. "We're waiting for Apple to send us more Minis to meet the demand."

The Mini's sales have also benefited from what's been called the iPod halo effect. The iPod music player has won an army of enthusiasts, 10 million and counting, and many of them are carrying their love for it over to other Apple products. Some 6 percent of iPod owners who had used only Windows have now switched to an Apple computer, according to a survey by Piper Jaffray, based in Minneapolis.

The third assault on Redmond comes from the open-source browser Firefox. Since its debut last November, its creator, the nonprofit Mozilla Foundation, in Mountain View, Calif., has recorded 25 million downloads. Already it has grabbed an estimated 5 to 6 percent share of the browser market from Microsoft Internet Explorer, an unprecedented setback for the software giant.

Firefox, like Linux and the Mac Mini, brushes off viruses meant for Internet Explorer. It also surfs the Web quickly, blocks pop-up ads, and lets users search a document from a small form in the corner of the window, rather than from a separate window that may obscure part of the text. It also lets users browse many sites at once with a minimum of desktop clutter by opening "tabs" in a window, rather than creating new windows.

Microsoft has responded by accelerating the release of its next version of Internet Explorer, originally planned for 2006, when the next Windows system, code-named Longhorn, is due. The new Explorer is expected this summer.

Will these three attackers loosen Microsoft's grip on the desktop PC, or will the software behemoth send them packing as it has so many challengers before? Roger Kay, an IDC analyst, says the first hint could come with Apple's first quarterly results after the Mini's release, which should be available by the time this article is printed. "Show me a two- to three-tenths of a [percentage point gain in Apple's market share] for five quarters in a row," he says, "and then I'll say something's going on."