Microsoft wakes up to Linux threat

Linux has joined heavyweights IBM and Sun Microsystems on Microsoft's list of major rivals.

Steve Ballmer, Microsoft's president and chief executive, said Sun, IBM, Oracle, America Online and "the phenomenon of Linux" are the biggest threats to the software giant. However, he added: "I'm not sure which [Linux] companies to name."

Speaking via a satellite link-up to IDC's European IT Forum, Ballmer struggled to be heard over a crossed line, and a planned video feed was replaced by two black and white photographs.

Ballmer said Microsoft is also wary of a few "smaller players" such as RealNetworks and Palm, but added that they are only a threat in a niche area of the software giant's business. "None of these [startups] are very broad competitors," said Ballmer.

He described the industry as being in the third phase of the internet. "Phase one was all about having a presence - to be on the net. It was not about how much business you did or how much profit you made.

"Phase two was all about getting 'eyeballs' and transaction collection. Phase three is all about effective business operations and a focus on doing business better." However, Ballmer said "some companies haven't done this yet".

Microsoft's recently launched .Net initiative aims to help companies achieve this third phase, according to Ballmer.

"We needed a platform to reflect the reality of the internet - .Net has to do with having a more flexible operations model and needing to integrate your business with others. To implement this vision we need to focus on internet standards like XML," he said.

"We believe in rich-client computing and also believe in a world where software evolves to be a service. You won't need to think about installing software anymore, it will be done over the internet."