It isn't really "if they are going to steal it we want them to steal ours" as quoted directly, it is "if they will only accept free, the we'de rather they be part of our ecosystem for free instead of encouraging someone else's to grow".
And then there are various ways to pass the bill for your software further - e.g. to the taxpayer, if you're a government organization or a company funded by EU grant (I used to intern at Rutherford Appleton Laboratory; I'm pretty sure Microsoft makes a boatload of money on the licenses for all those thousands of Windows machines that run there).
It's a brilliant strategy. Adobe uses it too (Photoshop is so trivial to crack that it must be intentional).
This way we would've had competition on the desktop and in the browser market way before Android and iOS started appearing on tablets.
"Once the world's second-largest Linux distributor, Red Flag Software has shuttered reportedly due to mismanagement and after owing employees months in unpaid wages.
China's state-funded answer to global software giants like Microsoft, the Chinese company filed for liquidation over the weekend..." (2014)
http://www.zdnet.com/article/chinas-home-grown-linux-os-shut...