But that was then. Now Microsoft may fear Linux on the desktop as much as it does the Mac. It's finally taking Linux seriously as a desktop operating system, and it has designed Windows 7 to kill it.
Let me explain.
The threat to Windows comes entirely from "netbooks" -- lightweight, inexpensive laptops that typically use Intel 's low-powered Atom processor and don't come with substantial amounts of RAM or powerful graphics processors. They're designed mainly for browsing the Web, handling e-mail, writing memos, and taking care of simple word-processing or spreadsheet chores.
Netbooks will account for about a third of all PC growth this year, according to Citigroup . Shipments will rise at an annual average rate of 60% to reach 29 million netbooks in 2010, compared with 18% growth for standard notebooks, says a September BNP Paribas report.
Clearly, the future is in netbooks. And that has Microsoft worried. Netbooks can't handle Vista's hardware demands, so XP is the only Microsoft operating system that runs on them. But Linux is ideally suited for lower-powered netbooks.
The result? Acer and Asustek, which account for 90% of the netbook market, are using Linux on about 30% of their low-cost notebooks, according to Bloomberg. Making matters worse, if Linux is used on those netbooks, it means that Microsoft Office isn't. So Microsoft takes a double hit every time someone buys a Linux netbook.
Microsoft isn't just worried about ceding 30% of the netbook market to Linux. It's also worried that if people get used to running Linux on netbooks, they'll consider buying Linux on desktop PCs as well. Here's what Dickie Chang, an analyst at IDC in Taipei, told Bloomberg: "It's a real threat to Microsoft. It gives users a chance to see and try something new, showing them there is an alternative."
Microsoft, though, has a not-so-secret weapon against Linux: Windows 7. Its new operating system, slated to be introduced sometime next year, is designed to work fine on netbooks. In fact, at Microsoft's recent Professional Developers Conference, where the pre-beta of Windows 7 was unveiled, Windows Senior Vice President Steve Sinofsky showed off Windows 7 on his Lenovo S10 and said it used less than half of the netbook's 1GB of RAM.
When Windows 7 ships, expect a massive marketing blitz pushing it on netbooks with special deals, and netbook hardware taking advantage of Windows 7 capabilities, including touch screens.
In fact, the blitz has already begun. Asus CEO Jerry Shen announced that he plans to release versions of the Eee PC powered by Windows 7 in mid-2009, including a touch-screen version.
This is anything but a level playing field. Because no company owns Linux, there won't be a competing marketing push for Linux netbooks. Microsoft has shown before how tough it can be on competitors -- remember Lotus 1-2-3, WordPerfect and Harvard Graphics? So expect Linux netbook sales to fall when Windows 7 ships.
Despite Microsoft's killer instincts, I don't think Linux netbook sales will stop dead. There will always be a niche for them. But within a year of the Windows 7 launch, Linux market share will drop. The high point for Linux netbook sales will be from now until the launch of Windows 7. After that will come the inevitable decline.
Preston Gralla is a contributing editor for Computerworld.com and the author of more than 35 books, including How the Internet Works (Que, 2006).
This story, "Windows 7: Linux Terminator" was originally published by Computerworld.