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Linux threat to NT grows
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March 1, 1999: 6:43 p.m. ET
Hardware, software firms back new system aimed at 'Net commerce
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NEW YORK (CNNfn) - Big hardware and software makers are expanding their ties to Linux, the free operating system that won IBM's endorsement last month, which could further hamper Microsoft's efforts to sell its NT software to major corporate users.
The race to embrace Linux shows no signs of slowing down. Intel (INTC) and Hewlett-Packard (HWP) said Monday they've expanded their backing of Linux, the brainchild of former University of Helsinki student Linus Torvalds, who now acts as primary architect for the further development of the OS. Published reports said Dell Computer (DELL) and Oracle (ORCL) also were stepping up their support for companies backing the operating system.
The moves add up to more trouble for Microsoft (MSFT) as it seeks to market new versions of NT to big corporations, industry analysts said. Some analysts said that if it lives up to its promise, Linux could end up reshaping the computer software industry.
"Linux is going great guns now," said analyst John Robb at Gomez Advisors, the research firm specializing in consumer e-commerce issues. "Microsoft is a big loser."
Linux server sales surging
Indeed, in the server market, where Linux competes with Windows NT, Linux sales surged 212 percent last year versus a 27.2 percent gain for Windows NT, according to research firm International Data Corp. The jump gave Linux roughly 17 percent of the market last year, versus almost 36 percent for Microsoft's NT.
The latest version of Windows NT, the industrial strength operating system from Microsoft, has been delayed and is now expected to reach the market later this year as part of Windows 2000.
Analysts said companies looking to boost computer capacity -- especially those looking for big systems to run Internet-based commerce or data services -- could turn to Linux, which is better suited to those types of applications.
"This is the year that Linux gains critical mass," said Jon Oltsik, analyst at Forrester Research, the technology research firm. "It'll be very important in big Internet commerce sites."
He noted, for example, that Barnes & Noble's (BKS) Web site, Barnesandnoble.com, is run on Windows NT while online broker E*Trade (EGRP) uses Sun Microsystem's Solaris operating system.
"By the end of this year, you'll have a visible household name with an all-Linux architecture," Oltsik said.
One attractive Linux feature: It's free over the Internet. It's also fast, reliable and "open," meaning that thousands of computer programmers around the world can add features and improve the software, hoping the changes will be approved by Torvalds.
The downside of Linux is it's hard for novices to use and does not work well on home PCs.
Microsoft says Linux is just another product in a crowded, competitive marketplace -- the line it's been taking as it defends itself in the government's antitrust case.
"For us it's not a big change -- there's always been competition out there," spokesman Adam Sohn said. "This is further evidence to bolster what we've said all along -- that there are tons of companies trying to provide better technology to customers," he said of the latest Linux developments.
Intel jumps on the bandwagon
Intel, for example, just took a small stake in VA Research, a California company that sells computers with Linux. The investment by the world's biggest chip maker was not its first in a Linux supporter. It previously invested in Red Hat Software, a North Carolina company that sells and services Linux, in September.
"If there's software that's popular with customers, we just want to ensure that it's running well on the Intel architecture," one person familiar with Intel's investments said Monday.
Separately, Hewlett-Packard, the nation's No. 2 computer maker, announced a new operation to back open systems such as Linux.
"HP sees Linux as a significant force in the industry and expects it to emerge as the platform of choice for … the Internet service provider and electronic-commerce software development markets," said Nigel Ball, a general manager in HP's Internet and applications system division.
HP's announcement came at LinuxWorld, a three-day trade show in San Jose, Calif., that is sort of a coming out party for the software. The Intel investment in VA Research was first reported by The Wall Street Journal. The newspaper also said Dell Computer has set a new pact with a company offering technical support for Linux and that database software maker Oracle would announce an investment in Red Hat.
Officials at Dell and Red Hat were not available for comment. An Oracle spokeswoman declined to comment.
Big boost from Big Blue
Last month IBM and Red Hat said IBM would start selling computers with the Linux operating system. In January, IBM rivals HP, Dell and Silicon Graphics (SGI) agreed to offer Linux on their systems.
The growth of Linux, which Torvalds developed eight years ago, must be sweet to the software's boosters, some of whom are seen as quirky renegades in the industry. Last month, about 100 people showed up outside Microsoft's San Francisco-area offices at a march dubbed "Windows Refund Day" organized by Linux backers.
There are other aspects to the Linux appeal. Some experts say cheap software such as Linux and Gnome, another "open" system, could help poorer countries such as Mexico and Pakistan catch up to wealthier countries using costly computer technology to boost economic growth.
Still, Linux is far from eroding Microsoft's dominance in PC software; its operating systems are installed on 80 to 90 percent of all personal computers. Linux is not that user friendly, though some people are working to make it easier to download and use.
"If Linux works, it affects the whole software industry and that affects Microsoft the most, since they're the biggest fish in the sea," said Forrester's Oltsik.
But support for Linux could hurt "second-tier" vendors of the Unix operating system such as Compaq (CPQ), which got a version of Unix when it bought Digital Equipment, Silicon Graphics and Sequent (SQNT), a server vendor.
"The pecking order would be Solaris (Sun Microsystem's version of Unix), Linux No. 2 and everybody else in some state of losing No. 3," said Oltsik.
"The interesting thing is that in spite of the size of Microsoft -- they're a huge, well run software company -- you can't compete with the mass of people on the Web."
-- by staff writer Steven Radwell
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