Bill Gates BESIEGED
He built it, and they came. They came by the thousands last week, aragtag army of pastyfaced computer geeks in sandals and T-shirts, streaming into the San Jose Convention Center in California’s Silicon Valley to honour the 29-year-old hacker from Helsinki who might just be the one to dethrone Bill Gates. Linus Torvalds, the Finnish anti-Gates who gave birth to the Linux operating system, was waiting with his wife, Tove, and a double stroller carrying their two infant girls, the very picture of domesticity with a diaper bag slung over his shoulder the way other programmers haul around laptops. But when he ambled on to the stage to deliver his keynote address, the geeks hailed him as their leader, erupting into cheers and prolonged applause. “Calm down,” an obviously embarrassed Torvalds said, and the crowd obediently fell silent. Afterward, they mobbed him for his
autograph, grown men behaving like adolescent groupies at a rock concert.
Who is Linus Torvalds, and why has he become a high-tech hero? He may not be well-known outside the computer industry, but in places like Silicon Valley Torvalds’ name inspires awe and respect in equal measure, and for one very good reason. Linux, the operating system he invented as a 21-year-old university student in Finland, has in recent months emerged as a potential threat to Windows, the product that has made Microsoft Corp. of Redmond, Wash., the world’s most highly valued company by market capitalization. And nothing, but nothing, would delight the hackers of Silicon Valley more than to see mighty Microsoft brought down to size. To them, Gates is the Darth Vader of the desktop, a dangerous megalomaniac who must be stopped before he and his $594-billion company achieve total world domination.
An upstart geek and an antitrust case present real threats to Microsoft’s software empire
It’s still a long shot, but two recent developments have increased the odds that Torvalds and other enemies of Microsoft will get their wish. One is the growing popularity of Linux (rhymes with cynics), a so-called open-source program that can be downloaded for free from the Internet. For years, it was a fringe operating system used mainly by software idealists, but in the past few months Linux has won endorsements from many of the biggest names in computing, Microsoft excepted. IBM Corp. jumped on the bandwagon last month joining other digital heavyweights such as Intel Corp., Oracle Corp., Sun Microsystems Inc., Hewlett-Packard Co., Silicon Graphics Inc., Compaq Computer Corp., and Dell Computer Corp. “The end is nigh for the Windows era,” Oracle senior vice-president Mark Jarvis declared in San Jose last week at LinuxWorld, the first major conference and exposition for the upstart operating system. “We’re moving to an
age of low-cost computing, and Linux is a key component of that transition.”
Another, more immediate problem for Microsoft is the antitrust case currently unfolding in Washington, in which the company stands accused of using its nearmonopoly in personal computer operating systems to squelch competition in the market for Internet software. Due to wrap up this spring, it is the most important antitrust trial since the breakup of AT&T in the early 1980s, and could have as big an impact on the
computer industry as the earlier case did on telecommunications (page 36). The two attacks are unrelated but complementary: Microsoft’s opponents are hoping the antitrust suit will slow the software behemoth’s momentum long enough to give Linux a chance to make serious inroads in the Windows empire.
To many people, that outcome might seem inconceivable. Although Microsoft’s share price has dipped recently—it closed last week at $155 (U.S.), $21 off its all-time high—the company’s profits continue to increase, up 75 per cent in the three months that ended on Dec. 31 to $1.98 billion. Microsoft’s control over computing is by most measures stronger now than ever before in the company’s 24-year history. As many as 95 per cent of the world’s 250 million personal computers run on Microsoft products from the moment they are switched on, a level of dominance achieved by few companies in any major industry, let alone in a sector so vital to the new economy. And with cash reserves of $29 billion, the Redmond giant has the ability to buy up potential competitors before they can become a threat.
That strategy cannot be used to stop Linux —because no one company owns or controls it. But Microsoft executives have another weapon in their arsenal: Linux, for the moment, is far less user-friendly than Windows. Ed Muth, Microsoft’s group product manager, acknowledges Linux as a competitor, but dismisses the prospect of the system’s widespread use. “There are fewer applications available for Linux,” Muth said in a recent interview, “there’s no long-term development road map, and there’s a higher technical risk in using it.” Still Microsoft’s aura of invincibility could be deceptive. Certainly no one knows better than Gates how easily technology companies can lose their footing. When Gates, then 20, and his childhood friend Paul Allen founded Microsoft in 1975, the computer industry was firmly in the grip of IBM—“Big Blue,” one of the world’s most successful and admired companies, so powerful that three U.S. administrations fought in court to break it up. The federal government eventually gave up that antitrust battle, but Big Blue was caught off guard by the revolution in personal computing during the 1980s and s lost its market dominance. The new leader I was Gates, who recognized long before the § established giants of the computer industry ¿ that PC software, not hardware, was where 1 the big money would be made.
The question is, will Microsoft miss out on the next big technological wave? Four years ago, the company woke up late to the growing popularity of the Internet, the phenomenon that now drives most of the hottest trends in computing, from electronic commerce to the demand for “intelligent appliances,” slimmed-down machines designed specifically to exchange e-mail and shop online. Microsoft has since caught up to its competitors, but only by spending hundreds of millions of dollars on research and development— and, the U.S. justice department charges in its antitrust suit, by unfairly targeting rival companies such as Netscape
Communications Corp. As it struggles to defend itself against that accusation, Microsoft has to hope that it doesn’t get sideswiped by another hot new trend, the open-source movement represented by Linus Torvalds and Linux.
The reason Linux threatens Microsoft’s hegemony is that it directly challenges the way most of today’s software is developed and marketed. In the early days of the PC in the 1970s, computer hobbyists—many of them university students—tended to write much of their own software and pass around copies of popular programs without paying for them. It was Gates more than anyone who fought to end the practice, penning a scathing “Open letter to hobbyists” in 1976 in which he accused computer enthusiasts of stealing his new company’s intellectual property. “The fact is, no one besides us has invested a lot of money in hobby software,” the Microsoft founder wrote. Those who used such programs without paying for them, he added, “give hobbyists a bad name, and should be kicked out of any club meeting they show up at.”
The letter provoked an angry backlash from amateur computer users, many of whom believed software belonged in the public domain. But within a few years, Gates’s profit-oriented approach to software development had become the rule rather than the exception. In 1984, a handful of activists at the Massachusetts Institute of Technology, led by an offbeat hacker named Richard Stallman, created the nonprofit Free Software Foundation to promote the use of nonproprietary programs. Few people outside the academic community, however, took the foundation seriously. Why write applications for free when businessmen such as Gates were proving just how lucrative a popular program could be? Across North America, programmers and budding entrepreneurs fantasized about creating
their own “killer apps”—then sitting back while the money gushed in.
One person who did not share that dream was Linus (pronounced Lee-nus) Torvalds. Named after the scientist Linus Pauling and the character from the comic strip Peanuts, Torvalds has been programming computers since his grandfather lent him a Commodore VIC-20 when he was 10 years old. He bought his first PC in 1990, not long after he enrolled in a programming course at the University of Helsinki to learn about Unix, an operating system created by AT&T in 1969 and still widely used by universities and corporations for industrial-strength computing. Like virtually every other PC in those days, Torvalds’ machine used Microsoft’s MS-DOS operating system, the precursor to Windows. Torvalds decided that Gates’s software wasn’t up to his requirements, so as an experiment he decided to try writing a version of Unix that could run on the PC. He quickly discovered that many other people shared the same goal.
A Canadian hat in the ring
In his 23-year business career, Bob Young has made only two big mistakes. The first was the time he allowed his Toronto-based computer rental business to be swallowed up by a larger company, only to discover that he hated working for someone else. The second was his reaction in 1992 when several of his customers introduced him to the Linux operating system, a huge patchwork of computer code that is freely available on the Internet. “It was the most bizarre thing I’d ever heard,” Young recalls. “I asked these guys where Linux came from and they’d say things like, ‘It’s from engineers according to their skills, to engineers according to their needs.’ ” The Marxist phraseology was enough to convince Young that Linux was, in commercial terms, a lost cause. “I knew that human activities don’t replicate themselves unless there’s a strong economic model, so I was one of the skeptics. I figured there wasn’t a chance in 100 this thing would take off.” Like a lot of one-time disbelievers, Young has since changed his mind. Instead of withering away, Linux has become the com-
puter industry’s fastest-growing operating system with a user base of 12 million people, and doubling every year. Young, meanwhile, has found his economic model—and it’s working just fine. Red Hat Software Inc., which he co-founded four years ago in the rolling hills near Raleigh, N.C., last year
LEADING THE CHARGE
Red Hat Software Inc. distributes the most popular of the simplified versions of the Linux computer operating system. The online magazine LinuxWorld recently polled 895 readers to find that Red Hat had assumed a commanding lead over its software competitors.
The usage breakdown:
raked in an estimated $30 million by selling Red Hat-branded versions of Linux, a product that cannot be copyrighted and which nobody really owns. With 400,000 copies shipped in 1998, Red Hat Linux is the most widely used version of Linux, and more than twice as popular as its strongest rival.
If Young were just another pushy marketing type, his success might be easier to comprehend. But “aggressive” is not an adjective that suits this lanky 45-year-old native of Hamilton. Cheery and self-effacing, Young comes across like an overgrown boy scout, slightly gawky with his horn-rimmed glasses and company red fedora. He considers himself first and foremost a salesman, but acknowledges that the label may leave a misleading impression. “There are salesmen who are very aggressive and convince you to buy things you don’t need, and there are others who are completely ineffective unless they’re selling something they truly believe in. I can be very evangelical when I get on a mission—when I know what I’m selling is better than the alternative.”
One reason Young is effective as a Linux evangelist is that his background straddles the often-contradictory cultures of business and software development.
Linux’s Torvalds operates in a so-called intellectual bazaar, where ideas are shared and hackers compete to find solutions
In fact, Stallman and other members of the Free Software Foundation had already created many of the basic components of a free, Unix-like operating system. The main thing missing was the “kernel,” the chunk of code that connects all the other pieces of software and performs much of the real processing work.
By the summer of 1991, Torvalds had written his own kernel, which he called Linux. Hoping to get some feedback from fellow programmers, he posted a copy of his creation on the University of Helsinki’s Internet server. Almost immediately, people began to e-mail him with suggestions, which Torvalds dutifully incorporated into the operating system. As months passed, the community of Linux users expanded from a handful of people to 50 to several hundred. And as more hackers contributed ideas,
Torvalds’ operating system grew more powerful and gained additional features. “It all happened so gradually,” Torvalds, who now lives and works in Santa Clara, Calif., northwest of San Jose, recently told Linux Magazine, a new monthly. “The only point where I kind of went, Wow,’ was early 1992, when it went from me knowing five other people who ran Linux occasionally to suddenly maybe 200 people who used it often. Suddenly, I didn’t know all the people that used it”
Early on, Torvalds made two decisions that were to prove critical to Linux’s future popularity. Instead of trying to write all of the pieces of the operating system by himself, he kept rejigging the kernel to take advantage of programs that had already been created by Stallman and his group. (Today, there are
He majored in history at the University of Toronto in the mid-1970s, but signed up for two programming courses and spent many nights in the computer lab in the basement of Sidney Smith Hall.
(“I was down there with all the other dweebs, feeding my punch cards into those big machines.”) After graduating in 1976, Young went to work for an equipment-leasing company that was owned by distant relatives, eventually persuading the firm to establish a computer rentals division with him as its head. That lasted until 1984, when Young started his own rental agency with some outside investors. He sold that company in 1990 and spent two years working for the new owners in New York City before striking out on his own.
While in New York, Young had joined a software user group as a means of making business contacts. His contribution to the club was to edit a newsletter for users of Unix, a commercial operating system pop-
ular in the academic and corporate worlds. To Young’s surprise, his readers were soon showering him with requests for articles about Linux, a then little-known Unix variant. Young assumed it was a passing fad. But the interest in Linux continued to increase, so he teamed up with a former IBM software engineer named Marc Ewing and launched Red Hat in early 1995. Their plan was to ride the Linux wave by assembling the various components of Linux, adding a word processor and several other programs, and distributing the package on CD-ROM for about $75 a copy. Young knows that many of his customers make copies of the software and share it with their friends, but that doesn’t bother him in the least. The company hopes in future to make most of its money by selling support and service to Linux users, so the more people who use the product the better.
thousands of programs capable of running on Linux, including word processors, spreadsheets, Internet browsers and a wide variety of games.) In addition, he decided to distribute his work for free under a licensing system invented by the Free Software Foundation. Known as the General Public License and dubbed “copyleft,” the scheme allows users to duplicate, alter, redistribute and even sell the software as long as that same freedom to copy and modify is passed along to all subsequent users. Developers who make changes to such programs are also required to make their source code, the guts of any program, freely available. Thus the term open-source software, intended to distinguish GPL programs from commercial software.
Another factor that drove interest in Linux was the increasing popularity of the Internet, which made it easy for software developers around the world to swap code and work collaboratively on projects. Created in the 1960s as a means of linking universities and defence research establishments, the Internet itself is a product of open standards and shared resources. Much of the software that makes the Internet work was developed under an opensource model, including Sendmail, the application responsible for directing e-mail to its destination. “The Internet would not function if it wasn’t for open-source software,” says Eric Raymond, 40, an influential Linux activist who lives in Malvern, Pa.
A self-styled “neo-pagan libertarian”
So far, the approach is working. From an initial payroll of four employees, Red Hat has grown to a staff of 100. In September, Intel Corp. and Netscape Communications Corp. simultaneously purchased minority stakes in Red Hat, an event that legitimized the firm in the eyes of many corporate executives. Last month, IBM and Dell lent their support by announcing plans to ship high-performance computers loaded with Red Hat Linux.
Many CEOs in Young’s position would now be rushing to cash in by selling shares to the public, but that is not one of his priorities. Belying the get-rich-quick mentality that pervades the high-tech sector, Young lives with his wife, Nancy, and three daughters in a “stereotypical three-bedroom house in the ‘burbs’ ” of Raleigh. Apart from feeling guilty about the time he spends away from the family on business trips, his main concern is to make sure Red Hat is still around five or 10 years from now, by which point he believes Linux will be as ubiquitous as Microsoft Windows is today. Then, perhaps, Young really will be rich, thanks to the popularity of free software.
who has been known to show up at Linux events dressed as Obi-Wan Kenobi from Star Wars—
“Use the source, Luke,” is one of his favourite expressions—Raymond is both the court jester and in-house philosopher of the Linux community.
(“Linus is our god, and Eric is his prophet,” one programmer joked during a break in the proceedings at LinuxWorld last week.) In 1997, Raymond wrote an online essay, “The cathedral and the bazaar,” that has become the manifesto of the open-source movement. In it, he argues that open-source software is superior to proprietary code not just because it is free, but because it is constantly being subjected to peer review by thousands of independent developers. The result, he says, is software that is less buggy than commercial programs. In Raymond’s analogy, companies such as Microsoft are cathedrals, monolithic organizations that jealously guard their secrets and, as a result, are slow to respond to changes in technology. Open-source develop| ers, by contrast, function in a kind of intellectual % bazaar, in which ideas are shared and program§ mers compete to see who can come up with the | neatest, most efficient solution to a problem. §
Raymond’s essay has had a profound impact on the software industry. In January of last year, Netscape, which had been waging a losing battle against Microsoft in the market for Internet software, announced that it would release the source code for Netscape Navigator 5.0, a program used to browse the World Wide Web. Company executives, who clearly hoped the move would spur interest in their software among hacker enthusiasts and lead to future innovations, explained later that their decision had been influenced by Raymond’s paper. Since then, a number of other technology companies, including Canada’s Corel Corp., a producer of graphics and office software, have announced that they, too, will make some of their source code public.
In Silicon Valley, it’s hard to find any major computer company that isn’t in some fashion examining the potential impact of Linux on its business. “Right now, we’re trying to figure out what it means to us,” says John McFarlane, an Ottawa native who runs the Solaris software division of giant Sun Microsystems in Menlo Park, Calif. Like many of its rivals, Sun recently announced plans to configure some of its hardware systems so they can run Linux. Sun, in fact, was one of the largest exhibitors at LinuxWorld. Richard Stallman was there, urging fellow hackers not to climb into bed with big business, but most in attendance expressed delight at the strong support from brand-name companies. “This is the comingout party for Linux, the sweet 16,” said Jon (Mad Dog) Hall, whose unruly beard and biker clothes belie his position as a Compaq engineer and as executive director of Linux International, an association of Linux users. In his speech opening the convention, Hall praised the business community for embracing Linux and rallied his fellow users by quoting Mahatma Gandhi: “First they ignore you, then they laugh at you, then they fight you, then you win.”
Hall hardly needed to spell out who “they” were—all 3,000 people in the audience knew without being told that he was referring to Microsoft. Hostility towards the Redmond giant was a recurring theme at the convention. One exhibitor passed out free T-shirts with the word “Microscared” written in the style of the company’s logo. At a party on opening night, the main
entertainment was a Bill Gates impersonator who insisted that Linux was a top-secret Microsoft creation that had gotten out of control. But Microsoft’s Muth throws cold water on such anti-Gates revelry by noting that “some people say positive things about Linux when their message is anti-Microsoft”
Exactly what the real Bill Gates thinks about Linux is unclear. Last fall, a leaked company memo warned that Linux poses a “direct, short-term revenue threat to Microsoft,” and that open-source software could eventually replace many proprietary programs. “Linux and other O.S.S. advocates are making a progressively more credible argument that O.S.S. software is at least as robust—if not more—than commercial alternatives,” said the memo, written by Microsoft engineer Vinod Valloppillil. (Linux supporters call it “the Halloween document” because that was the day it appeared on the Internet.) Without going as far as that missive, Gates told a German computer magazine last month that he sees Linux as one of several “serious competitors” to his company—along with, among others, Sun’s Java operating system and the software used in handheld Palm computers from 3Com Corp. of Santa Clara, Calif.
Still, some Linux faithful are convinced that both the memo and the Gates interview were part of a Microsoft campaign to deflect criticism that the company enjoys a monopoly by playing up the competition to Windows. “The memo was just too good to be true,” says Bob Young, the Canadian CEO of Red Hat Software Inc. of Raleigh, N.C., the leading distributor of Linux on CD-ROM. “Microsoft might be aggressive, they might do evil things, but they operate a highly effective organization. The Halloween document wasn’t up to their [professional] standards.” Young’s view is that Linux will have a tough time unseating Windows as long as PCs—rather than handheld devices, Webenabled phones and other new electronic gizmos—remain the most common platform for computing.
Judging by Microsoft’s recent efforts to extend the Windows franchise to handheld computers and other devices, the company
THE RISE OF UNUX While no one has touched the commanding presence of Microsoft Corp.’s Windows, worldwide sales of software to operate corporate computer servers grew 25 per cent in 1998, largely because of Linux. Here is how Linux’s growth stacked up against the competition: Linux Microsoft's Novell Windows Netware NT Server
The antitrust case got off to a bad start. In testimony on video, Gates could not recall pivotal meetings
seems to agree. The use of Linux on corporate network servers may be increasing, but Microsoft’s Windows NT Server product is still the world leader in that category. A survey by International Data Corp. of Framingham, Mass., found Windows NT accounted for 36 per cent of network server installations last year, followed by Novell Netware at 24 per cent, with Linux and Unix tied at 17 per cent each.
“Our sales are strong and our customers’ satisfaction is definitely very good,” says Erik Moll, marketing manager for Windows NT Server at Microsoft Canada in Mississauga, Ont. An Angus Reid survey of 800 mid-sized Canadian companies last fall found that about 46 per cent used Windows NT, while 40 per cent used Netware and 16 per cent used some form of Unix.
Hoping to strengthen its lead in the corporate server market, Microsoft plans to roll out a new and more robust version of Windows NT, Windows 2000, later this year. (Its chief engineer, Brian Valentine, jokingly calls it “the most important project in the history of mankind.”) The product, however, is two years behind schedule and reportedly riddled with bugs, meaning there is every likelihood that it will not appear before the company learns its fate on another front: the antitrust trial in Washington.
Microsoft has not fared well so far in that battle. Court observers, and many of Microsoft’s own supporters, say the company and its lawyers have mishandled key aspects of the case, giving the government’s lead trial counsel, David Boies, the upper hand. The trial got off to a bad start for the company last October when Boies— who represented IBM in its antitrust case two decades ago—aired a videotaped deposition of Gates. Under questioning, Gates appeared uncomfortable and evasive, claiming not to recall pivotal meetings about which he later sent or received e-mail messages, and quibbling with prosecutors over the meaning of common words such as “compete.” “I have no idea what you’re talking about
when you say, ‘ask,’ ” Gates said at one point in a Bill Clinton-like exchange with a government lawyer.
More recently, several of Microsoft’s witnesses have looked shaky under cross-examination, while executives of rival companies have taken the stand to accuse the company of bully tactics. In one of the most damaging exchanges, Microsoft senior vice-president James Allchin played a videotaped demonstration intended to show that Windows does not function properly when its Internet software is removed. Earlier, the government had contended that the Internet browser was not an essential component of the operating system and that the company had bundled it with Windows primarily as a means of undercutting Netscape. Allchin’s tactic backfired when Boies pointed out that the tape had been edited, prompting the judge to say the tape was so flawed that it cast doubt on the “entire reliability” of this evidence.
On another occasion, Intel vice-president Steven McGeady testified that his company had to drop one of its software products after Microsoft threatened not to make Windows compatible with a new Intel chip. Similarly, an Apple Computer Inc. official said Microsoft pressured it to abandon most of its multimedia software products, and an IBM executive accused Microsoft of discouraging independent software firms from writing programs that could run on Big Blue’s OS/2 operating system. “The world is finally seeing the real Microsoft, the Microsoft we’ve seen in Silicon Valley for many years,” says Gary Reback, a lawyer in Palo Alto, Calif., who represents several of Microsoft’s competitors and is an outspoken critic of the company.
The view from Redmond, not surprisingly, is different. “For the most part we feel good about the way the case has unfolded,” says Brad Smith, the company’s general counsel for international law and corporate affairs. Smith, who has attended much of the trial so far and plans to return to Washington when testimony resumes in mid-April, adds that journalists covering the case have made too much of the instances in which U.S. District Court Judge Thomas Penfield Jackson has rebuked Microsoft’s lawyers or displayed impatience with the company. “It’s a risky business to gaze into a crystal ball based on a judge’s comments in the course of a trial,” Smith says. ‘We’ve achieved what we hoped to achieve, and I don’t think there is any evidence in this trial of any harm to consumers. We feel good about that.”
Perhaps the best thing about the current trial from Microsoft’s perspective is that it will almost certainly not represent the final „ word in the antitrust case. Even if Judge £ Jackson rules against Microsoft—and most £ analysts expect he will—the company has an I automatic right of appeal to the U.S. Court of i Appeals, which has previously issued judg| ments favouring Microsoft. Depending on the outcome at that level, either side could petition the Supreme Court for a final ruling. “We’re probably looking at another one to two years,” Smith says. In the meantime, he stresses, Microsoft’s 25,000 employees will be working hard to maintain the company’s competitive edge: “Everybody here knows we’d better keep improving our products or we won’t be the industry leader when the decision in this case is finally rendered.”
The dilemma Microsoft faces, of course, is that the longer the case drags on, the more opportunities its enemies will have to grab market share, knowing the company cannot fight back too aggressively without hurting its chances in court. For now, time is on the side of Linus Torvalds and his programming allies. Torvalds said as much last week in the closing words of his speech at LinuxWorld: ‘We want to take over the world, but we don’t have to do it by tomorrow. It’s OK to do it by next week.” The hackers laughed, then cheered. This is war, Silicon Valley style—a clash of the iiber-geeks, and may the best code win. □