Microsoft + Novell = Monopoly 2.0?

The O’Reilly Open Source Conference is one of the premier events for hackers, executives, users, and industry analysts to share and discuss open source trends, strategies, and perspectives. It has been so successful for so long that Microsoft couldn’t let it continue without becoming a top sponsor, which they have now been for a number of years. One thing that sponsorship buys is a keynote speaking slot, and Microsoft’s Sam Ramji took that slot on the final day of the 2008 conference.

Sam’s message to the audience, which included leading open source companies, open source project leaders, board members, venture capitalists, etc., is that Microsoft is truly, truly interested in
playing nice with the open source community. (Remember when Jason Matasow asked How can Microsoft not be evil? The question remains unanswered…) Sam took a new approach, going so far as to ask the question of the entire audience what can Microsoft do for Open Source?. It was a question that Sam also asked me personally, outside the keynote environment. And I told him I would answer him, personally, in a public blog posting, so that none could accuse me of any sort of conspiracy in my act of answering him. Several thousand people have now seen my answer, and yet there has been no word whatsoever from Microsoft nor Sam as to whether they want to address any one of the four responses I gave. Neither has there been any evidence that they have taken the first step in responding to any of the other responses generated by the audience who attended Sam’s keynote at OSCON, such as providing a universal patent peace to open source developers, distributors, and users.


Microsoft’s silence on the topic of what they can do for Open Source has now been shattered by the news that they will follow none of the suggestions by any of the leaders in the open source community. Rather, they will spend another $100M on software they have no intention of ever actually using. Matt Asay dismisses this a mere stupidity by Microsoft, which is a shockingly naive conclusion.

Predatory pricing (selling products at a price far less than one paid to produce them) is not, in and of itself illegal, but it can be illegal when one uses one’s monopoly position in the market to finance such pricing in markets where one has a monopoly. Asay provides primary evidence of a potentially new form of monopolistic behavior, predatory pricing by proxy:

But it’s not the interoperability provisions that anyone is going to be talking about. It’s the $100 million in additional SUSE Linux certificates that Microsoft is buying. I know from friends at Novell that customers are indeed lapping these up, but not for the reasons publicly stated (patent protection (Microsoft) and interoperability (Novell). No, the primary reason is that they are cheap.

With this underwriting of Linux by Microsoft, Novell is able to sell its Linux software at highly advantageous pricing.

Asay notes with glee that Red Hat has shown consistent robust growth in spite of these antics, and thus he concludes that Microsoft, who can easily afford to lose $100M here and $100M there because their existing monopolies earn them nearly $50M in profits a day (based on FY2008 earnings of $17.7B USD), is merely throwing away their money. And Novell, if not smart, is at least not unholy, because it’s far less heinous to cash the check of a fool than to cash the check of a criminal. Especially in business.

But is Microsoft really so stupid that they would write a $100M check to prop up a message that nobody believes? I don’t believe so, and I especially don’t believe so given that nobody in the world of open source is asking Microsoft to keep propping up Novell. My conclusion, especially given the lack of response from Sam Ramji, is that Microsoft knows perfectly well what it is doing. Microsoft’s good-faith effort at technology innovation, Vista, has failed, and so they are resorting to their true core competency, updated to the 21st century: Monopoly 2.0.

Fool me once, shame on you. Fool me twice, shame on me. Asay may be right that Microsoft is throwing away their money, in which case customers and shareholders may wish to be less generous sharing their money with Microsoft. Or Microsoft may be pursuing a new way to undermine open source–is that something you want to support?