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Oracle backs Linux in move that targets Red Hat

Written by: Staff
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SAN FRANCISCO, Oct 26: Oracle Corp made its boldest move yet into Linux software, offering cheaper technical support than top Linux distributor Red Hat in a surprise bid to wrest away its rival's customers.

Shares in Red Hat tumbled 16 percent as Oracle's offer of Linux technical support at half-price threatens the customer support fees that provide a key portion of its revenue.

Oracle Chairman and Chief Executive Larry Ellison said it aimed to solve key problems holding back the adoption of Linux among big corporate customers.

''Our support costs less than half what Red Hat charges,'' he told the annual OracleWorld user conference in San Francisco.

Red Hat could not be immediately reached for comment.

Linux is the most-popular variant of open-source software, which lets developers share code and add functions. Users only pay for custom features, maintenance and technical support.

Entering the fast-growing Linux market propels Oracle into an industry segment where it has only indirectly participated.

It is significant for Oracle because it can now supply not only databases and applications but also an operating system, giving it what the industry calls a complete ''software stack.'' Analysts see it as an good counter-balance to the Windows operating system of Oracle arch-rival Microsoft Corp. but also a sign that cut-throat competition threatens the spirit of cooperation embraced by the open source community.

''What Oracle is saying is that Linux is now big business and it has to be run as big business rather than as a social network,'' said Bruce Richardson, an analyst with AMR Research in Boston. ''This is Phase 2 of the evolution of Linux when the world's top database company and No. 2 applications company is now saying we are going to pledge our full support to Linux.'' LINUX FOR CAPITALISTS Red Hat shares fell 16.4 percent to .32 in extended trade from a Nasdaq close of .51 following the announcement.

Oracle rose to .71 from a regular-session close of .62.

''What happens to Red Hat? Is killing them an unintended consequence?'' an audience member asked Ellison during a question-and-answer session.

''This is capitalism, we are competing,'' answered Ellison, one of the technology industry's most outspoken executives. ''We are trying to offer a better product at a lower price.'' Responding to a principal concern among big businesses, Oracle will fix bugs in current and prior versions of Red Hat Linux software, providing similar levels of technical support to what it now offers on Oracle databases and applications.

Oracle said this year it was considering launching its own Linux operating system and had looked at buying a major Linux supplier. Many analysts had predicted it would look to extend its Red Hat partnership rather than take it on directly.

Oracle executives declined to comment on whether it had offered to buy Red Hat before declaring war.

Edward Screven, Oracle's chief corporate architect, also denied recent rumors that Oracle was considering backing a rival Linux distribution project known as Ubuntu.

Asked at a news conference after Ellison's speech if Oracle would consider providing support to Linux alternatives besides Red Hat, Screven said: ''We certainly will happily consider offering support for other distributors.'' Oracle's move was met with endorsements from some of its closest technology partners, including Intel Corp., Dell Inc.

and EMC Corp. International Business Machines Corp., a major rival in database and middleware software, also signaled its support for the move.

''Oracle's support for Red Hat Linux will encourage broader adoption of Linux in the enterprise,'' Bill Zeitler, an IBM senior vice president, said in a statement.

Reuters

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