Microsoft has confirmed it sees the open-source software movement as a threat to its commercial business model.

In its quarterly report filed with the US Securities and Exchange Commission (SEC), Microsoft says: "The popularization of the open-source movement continues to pose a significant challenge to the company's business model. This is including recent efforts by proponents of the open source model to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products."

Its attitude contrasts with Apple's open-source strategy. "We think its great", said Apple CEO Steve Jobs of open source technologies during his Macworld San Francisco 2003 keynote.

Microsoft has said that if the open-source movement continues to gain market acceptance,
it may have to reduce its prices, and that revenue and operating margins may consequently decline.

Apple's approach is to move away from proprietary systems, releasing software solutions such as X11 for X that help open-source developers participate in building solutions for the Macintosh platform.

Apple's worldwide product marketing senior vice president Phil Schiller told his Power of X keynote at Macworld Expo: "We now have one development environment that spans everything, which allows for rapid application development. We are working to build the most robust, advanced operating system that's based on open standards. This is a ten-year-plus product - it's going to move and to grow."

Microsoft contrasts its commercial software development model (CSD) with that of the open source movement. Microsoft claims the investment it makes in CSD benefits end users.

In its filing, Microsoft said of CSD: "It allows users to rely on the expertise of the company and other software developers that have powerful incentives to develop innovative software that is useful, reliable and compatible with other software and hardware."

It continued: "Revenues would be unfavourably impacted if customers reduce their spending on Microsoft's solutions because new product offerings are not perceived as adding significant new functionality or other value to prospective purchasers."