In an interview with LinuxWorld Australia, Linux Torvalds talks a little about his expectations for Linux on the desktop in 2004.  He makes a few points that I think bode well for Linux in the near future:

• With the release of the 2.6 kernel, Linux has some direct desktop rendering support, which will help stability and performance for desktop systems.
• Having a major player like IBM behind Linux, even though their focus (right now) is on big iron rather than desktops is a Good Thing.
• Commercial software support for Linux is increasing, but more in the “software and services” space than in software only.  This isn’t necessarily a bad thing, just quite different from the way that software first appeared for desktop personal computers.

What we don’t know right now is whether there’s a market for proprietary shrink-wrap software on the Linux desktop.  I think there is room for personal finance packages and some vertical market applications, but I’m not expecting a huge surge in the number of successful Linux-focused software companies.