Jonathan Schwartz really needs to read this article - the one I blogged on yesterday:

How? It's trivially simple. Why do carriers give handsets away for free? Because they make money on the subscription necessary to receive the handset. Why do banks give away free checking, or free credit cards? Because they acquire new customers. Why do Google and Yahoo! give away free search? Because there's a fortune in the end result.

So why on earth would we give our OS away for free?

Because it'll ensure those without the economic wherewithal to pay for it will still consider using it. Companies that suffered from piracy a decade ago now know the lesson well - piracy is a good thing so long as the pirates are folks who could never afford your products. So stop calling them pirates, call them users. Free software has no pirates. As I've said forever, there's value in volume, even if you're not paid for it.

The strategy he outlines only works when you have very, very large volume. Even then, you'll notice that MS jacked the prices up for MSDN subscriptions - which ought to tell you something about the limits of free/cheap pricing in the heavy volume arena. The problem with giving things away is that the number of people who will actually pay you for related services tends to be really small - which again, calls for massive volume. Here's a tip - Open Solaris won't have massive volume - which means that Sun will be losing money on this right from the start.

Combine that with their highly dubious purchase of StorageTek, and you have to wonder what they are smoking out there...