I have to admit, I never really thought that client side Linux would go anywhere. And, in the traditional PC/laptop market, it hasn't. However, it is being used extensively in the growing NetBook segment, and it's starting to do damage to Microsoft's bottom line:

Client revenue declined 8 percent as a result of PC market weakness and a continued shift to lower priced netbooks.

That's an astonishing admission. It means that people are forgoing higher-priced laptops, and instead buying netbooks -- and many of those netbooks are powered by Linux. So Microsoft loses out not only on sales of Windows, but also sales of Microsoft Office as well. Estimates are that 30 percent of all netbooks ship with Linux.

The two big cash cows for MS are Windows and Office. On the luxury end, Apple is doing some damage with the MacBook and MacBook Pro. The surprising part (to me, at least) - is how much damage is being done at the other end of the segment by the low end offerings. I'm not sure whether Windows 7 will really make much of a difference here - while all reports are that it's a stable, solid OS, it's not really targeted down at that end. Microsoft suddenly has a two front war to fight - Apple on one end, and the low cost vendors who are making a go of it with Linux on the other.

On an anecdotal note, when I go out and give talks (like the one I recently gave in Dallas), I'm seeing lots of Macs, but also a rising number of netbooks - some with very small footprints. I'm seeing fewer and fewer Windows boxes amongst the audiences I speak to.

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