"To the extent the open source model gains increasing market acceptance, sales of the company's products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline," it said.Declining software revenues and margins could curtail Microsoft's ability to fund hemorrhaging projects like the Xbox, but the company still has a ridiculous amount of cash on hand.
While I'm sure that few Windows users will be complaining if Microsoft lowers its software prices, I have to wonder how the open source and alternative OS communities will react. Microsoft can certainly afford to charge less for some of its software products, and I can imagine price cuts ruffling the feathers of more than just a couple of its competitors' feathers.
As a monopoly, Microsoft must tread lightly when it comes to competition. Could deep price cuts, rebates, or even "Buy Windows XP and get a MS Natural Keyboard" deals be seen as an abuse of Microsoft's monopoly? If so, what competitive avenues are open to the Redmond monopoly?