A leaked memorandum from a Microsoft Corp. engineer suggests that the famously competitive software company is girding for battle against the upstart Linux operating system.

The memo describes Linux as a ``short/medium-term threat'' in the rich market for software that runs on computer servers. It speaks of ``beating Linux'' by stressing the product's drawbacks. It also suggests undercutting Linux's growing popularity by adding enhanced features to Microsoft computer networking products that compete with Linux.

Microsoft has confirmed that engineer Vinod Valloppillil wrote the memo in August. It was posted late Sunday on the Internet by Eric Raymond, a well-known Linux software developer and industry gadfly.

Similar memos from Microsoft executives have formed a key part of the federal government's ongoing antitrust suit against the company. Raymond doesn't believe that any of the proposals in the Valloppillil memo are illegal. But he sees them as proof that Microsoft is unwilling to coexist with Linux and other ``open-source'' software, or OSS, products based on universal software standards that Microsoft does not control.

``There's a fundamental opposition between the Microsoft way of doing things on the one hand, and the Internet open-standards, open-source world on the other,'' said Raymond.

But according to Microsoft's enterprise marketing group manager Ed Muth, the memo is just one man's opinion, not official Microsoft policy. ``I think overall it's a good piece of work that does a thought-provoking job of raising the issues,'' Muth said.

Open-source software like Linux is usually available free of charge. Just as important, open-source programs let users make modifications to the software by including a copy of the raw ``source code'' created by the program's designers. As a result, users of open-source code can easily customize their software.Linux itself is largely composed of software created by the GNU Project, a volunteer group sponsored by the Free Software Foundation in Cambridge.

Supporters of open-source software say it's cheaper and more reliable than traditional programs made by companies like Microsoft.

And the memo suggests that Microsoft has gotten the message. ``Linux and other OSS advocates are making a progressively more credible argument that OSS software is at least as robust, if not more, than commercial alternatives,'' wrote Valloppillil.

Indeed, open-source products like Linux have surged in popularity in recent months. Industry estimates suggest that Linux is running on about 7 million computers worldwide, and that the number is growing rapidly.

Because no one company owns open-source software, it's difficult for Microsoft to compete with it head-on. ``We must target a process rather than a company,'' the memo says.

Open-source software is well suited to the Internet because it's based on standard ways of performing certain tasks, like handling e-mail. These protocols, with names like POP3 and SMTP, are standard software commodities known to programmers worldwide, and they can be used without paying royalties to Microsoft or anyone else.

``Linux can win as long as services/protocols are commodities,'' Valloppillil warns. He urges Microsoft to add new features to the standard protocols, so that the Microsoft versions work better than the open-source versions. In this way, he writes, ``we can deny OSS projects entry into the market.''