Anti-Linux Incentive Funds Revealed

The revelation of special Microsoft funds to persuade schools and governments to select Windows over Linux has caused a stir in the European Community, where Linux is increasingly popular with governments and regulators are currently reviewing Microsoft sales tactics. The tactics employed in this case, revealed in an internal memo to sales staffers, have been used by Microsoft and others before, and the fact that Microsoft is competing against no-cost software might give the company more latitude in reducing prices. Nonetheless, the episode could contribute to a new round of antitrust problems and give customers reason to bargain harder.

Educational and Government Incentive Program

The July 2002 memo from then Worldwide Sales and Services Group Vice President Orlando Ayala was addressed to general managers of sales operations in Africa, Asia, Europe, and the Middle East, as well as to several senior Microsoft managers, including CEO Steve Ballmer.

The memo told executives that they could draw funds from the company’s Education and Government Initiatives program if a strategic account was in danger of losing to a competitor. In particular, Ayala singled out Linux.