Like Microsoft's product strategy, the list of competitors that the company most worries about is a moving target. At various times, the Redmond giant has pointed to Sun Microsystems, America Online (AOL), Netscape, and even Nintendo as the company from which it has the most to fear. But this week, Microsoft president and CEO finally placed the crosshairs on the open source solution Linux, stating that the upstart OS was a "phenomenon" that needed to be addressed. Microsoft is currently ramping up to release the second beta of Whistler, the successor to Windows 2000. Not coincidentally, the Linux developer community finally signed off on the most recent major revision to the Linux kernel just last week, a version that analysts say has what it takes to compete effectively with Windows.

"I think you have to rate competitors that threaten your core \[product line\] higher than you rate competitors where you're trying to take from them," Ballmer said recently. "It puts the Linux phenomenon and the Unix phenomenon at the top of the list. I'd put the Linux phenomenon really as threat number one." Computer Reseller News (CRN) notes that Ballmer made this comment on the same day that Linux maker Corel announced it would disclose a new corporate strategy later in the month. Corel had previously signed a deal with Microsoft that would require it to port Microsoft's .NET technologies to Linux if asked; subsequently, rumors have persisted that Corel would exit the Linux market and focus its products on .NET instead.

Ballmer also identified its other major competitors, such as Oracle and Sun, which make server products that compete with Windows 2000 as well. "I think \[servers\] are our biggest potential short-term return," he noted, and "I'd put AOL probably maybe at that level or a half-step down from there.