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Microsoft will take on Linux in the appliance market with an entry-level "Longhorn" Windows Server that will support a small number of users but requires no client access licenses, channel sources say.

The planned Windows Server OS appliance, code-named Fresno, will be bundled by OEMs and system builders and is targeted for availability in 2007 as part of the Longhorn server lineup.

The Longhorn appliance, with software and hardware included, will be priced at less than $1,000, several sources said. The software is slated to be available only to OEMs and system builders and cost a few hundred dollars.

Microsoft didn't comment on the matter.

With the offering, Microsoft would be positioned to unravel Linux's momentum in the appliance market, according to channel sources.

"It's a low-end, inexpensive server that can be used like a server appliance, a security box or a file server, and it's based on Longhorn," said one channel source briefed on Microsoft's plans. "You don't need CALs [client access licenses] to attach to a Fresno server."

Microsoft currently offers a Web server edition of Windows Server 2003, but no client access is permitted.

"They've always had a low-end server priced OK, but then they got you with the CALs," said one system builder familiar with Microsoft's product plans. "Because of that, Microsoft is losing out to Linux in this space."

The Longhorn appliance would allow a small number of Windows clients, perhaps as many as five, to attach to the server without paying expensive CAL fees.


It's very low-end and designed for incredibly small shops that are not using servers," said another source familiar with the appliance effort, who requested anonymity. "Microsoft realizes small shops will move to servers, and they're going to make sure they're not going to Linux appliances with Google applications on it."

The Windows Server appliance also will enable Microsoft to participate in the emerging virtual appliance market, in which the operating system is fused with an application stack inside a virtual machine.

Oracle has pledged to develop such virtual appliances using a modified version of Red Hat and the Oracle application stack. And at VMworld, VMware launched a virtual appliance marketplace and certification program and named Red Hat as one partner committed to creating virtual appliances based on Linux and its application stack.

Industry analysts said the Longhorn appliance makes sense, but Microsoft may have a tough time selling in the virtual appliance space unless Windows is licensed differently.

"Microsoft already offers storage appliances, and any additional appliance offers would be a logical extension," said Gordon Haff, principal IT analyst at Illuminata, Nashua, N.H. "They're at a disadvantage in the virtual appliance space, though, because they are late and because their licensing is less virtual appliance-friendly than open-source software."

Still, Microsoft will be able to capture a portion of the server business going to Linux, one channel source pointed out. "It would be a good second server for small business," said the source. "Normal licensing for the Windows Server is more than the whole [Windows] Small Business Server, so that's an impediment. This allows people to buy more hardware."