March 2, 2004

Sun sees Linux eroding software profits

The global spread of free software such as Linux could erode software companies' profit margins and give computer hardware
producers an edge, a top Sun Microsystems executive says.

Greg Papadopoulos, executive vice-president and chief technology officer of the company whose computers run networks and help power the Web, predicted
that so-called "open-source" software development was here to stay, but he also said it was being distorted by attempts to commercialise it.

"The only reason that software has traditionally been such a high-margin business is that it has traditionally been proprietary," Papadopoulos said on
Tuesday, referring to products from software giants Microsoft and Oracle.

"That same economics of software (are) not going to apply in a globally open software environment," he told Reuters in an interview.

"But last time I checked, you couldn't download hardware over the Web," he said. "Contrary to the ... conventional wisdom that software companies are
the high-margin business in the IT sector, systems companies are now where the margin is."



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