One of Microsoft's fiercest old rivals says it's undergone a 'complete inversion'

At this point, Microsoft's long-time hatred of the free Linux operating system is well-documented - the company spent years trying to stamp out any free software that would threaten its Windows cash cow.

And yet, Linux went on to become one of the most important pieces of software in the world, loved both by programmers for its sheer power and big companies by simple virtue of being free.

Under CEO Satya Nadella, Microsoft has come around and started embracing Linux and its ilk. Most recently, Microsoft made waves by announcing that Windows 10 will soon get a limited superpower to run Linux software. That's a big deal when it comes to winning over developers.

To make that unprecedented integration between Windows 10 and Linux happen, Microsoft turned to Canonical, the 12-year-old company behind the mega-popular Ubuntu version of Linux.

Microsoft's new love of open source and Linux is a "complete inversion" for Canonical, says founder Mark Shuttleworth - a visionary multimillionaire and a fascinating guy who became the second-ever space tourist in 2002.

Before this shift, Canonical saw itself as "scrappy," the "rebels" fighting to put a dent in Microsoft's domination of the market, he says. Now, they're working together. And it turns out with what he calls the "trauma" of competition behind them, Microsoft and Canonical make a great team.

"We're past that now," Shuttleworth says.

With that rivalry behind, Canonical can start looking ahead. Indeed, Ubuntu 16.04, a new version out today, brings lots of improvements that make life easier for its many millions of users - and paves the way forward for the developers who rely on it to build the next generation of software.

'A bit of a stretch'

Once not so very long ago, Canonical was positioning Ubuntu as a true competitor to Windows on the PC. It was designed to marry Linux's high-minded philosophies of openness and freedom with the slickness and ease-of-use people expect from Windows or Apple's OSX.

That never really worked out the way that Linux advocates wanted. Developers failed to bring popular consumer apps or crucial business apps to Ubuntu, and so customers shied away from it. And while Canonical has even extended Ubuntu to phones and tablets, it's never really caught on as a consumer offering.

"Personal computing is a bit of a stretch," Shuttleworth says.

Still, some developers are very vocal fans of Ubuntu. In the public cloud, Ubuntu isn't quite the gold standard, but it's close. The success of Ubuntu in the public cloud has been a shot in the arm to Canonical, which has redoubled its efforts to serve developers, Shuttleworth says.

"[Developers are] a very independent, technocratic community and I'll bend over backwards for those guys," Shuttleworth says.

The way forward

Still, the path forward for Ubuntu isn't totally clear, by Shuttleworth's own admission. The public cloud opportunity is huge, and it's bringing more developers to Ubuntu as an operating system. But selling free software is still a very difficult business model, and so far only $14 billion Red Hat has ridden it to consistent financial success.

While the cloud is contributing some impressive figures to the bottom line, Shuttleworth says, Canonical is still not profitable across the entire business.

So for its next big opportunity, Canonical is looking past the desktop and even the cloud, working to make Ubuntu ready for the "Internet of Things," the buzzword for internet-connected devices.

Because it's a free operating system, and developers are already so familiar with it, Shuttleworth says, Ubuntu is a natural choice for developers and companies to put on their next-generation gadgets. With companies like Alphabet's Nest and Amazon betting big on these devices, it's a trend worth riding.

"We think we can do as well in the next wave of computing as we have in the public cloud," Shuttleworth says.

It's an opportunity that Microsoft is also chasing, with its Windows 10 IoT Core operating system - which is also free. But Shuttleworth says that it's okay if Ubuntu never gets as many connected device developers as Microsoft - they serve different markets, and Canonical is just focused on winning the Linux developer.

"Windows developers will never look at Ubuntu," Shuttleworth says.

In late 2015, Shuttleworth raised the possibility of an IPO for Canonical, but now says that they'll probably wait until this sea change settles out a little bit and their business model is more consistent.

"You wouldn't want to do an IPO if you don't know where the money is coming from," Shuttleworth says. "As soon as you let the letters 'I,' 'P,' 'O,' into the room, people stop thinking about what they're supposed to be thinking about."