June 16 (Bloomberg) -- Microsoft Corp., whose Windows software runs 95 percent of the world's personal computers, lost a contract for programs to run 14,000 PCs for the Munich city government to the free Linux software.

The city's council voted in a closed-door meeting 50-29 in favor of a detailed plan to switch to Linux from Windows. Munich, which has spent more than a year studying how to make the move, will accept bids within a few months from Linux vendors. Companies such as International Business Machines Corp. and Novell Inc. are expected to fight for orders.

``IBM and Novell worked pro bono, supporting us with the development of the detailed plan,'' Councilwoman Christine Strobl, vice-chairwoman of the city's ruling Social Democratic Party, said in an interview before the vote. ``Now the bidding will start and we'll determine which companies will be chosen.''

The switch will be the biggest PC defection to Linux ever, said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon. Windows for PCs accounted for 32 percent of Redmond, Washington-based Microsoft's $32.2 billion in sales last year, and Chief Executive Steve Ballmer last year offered Munich a lower price to try and keep the city's business.

``Our decision can act as a signal to other communities,'' Strobl said. ``The reaction of Microsoft in the past year and in the last months demonstrated that.''

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: June 16, 2004 11:38 EDT