May 29, 2002

Red Hat might face a new Goliath in "United Linux"

- by Tina Gasperson -
Word on the street is that several Red Hat wannabes are ganging up against the
company that is Linux to much of the world. On Thursday, Caldera, SuSE,
Turbolinux and Conectiva are hosting a conference call for an "announcement that
will shape Linux in the enterprise and around the globe." It's been called a
"United Linux," and it appears that will be more than just a descriptive term.
While the rest of us were begging Caldera et al for a hint, LinuxGram's Maureen O'Gara
found a source who leaked the gist of the
announcement. Another unidentified source
has confirmed to NewsForge that Caldera, SuSE, Turbolinux and Conectiva will indeed
announce "united Linux" on Thursday. A little more digging uncovered the domain
UnitedLinux.com, secured by
password-only access, but listed in the NetSol whois database as being owned jointly
by SuSE and Caldera. SuSE UK's commercial director Jasmine ul-Haque
also confirmed to NewsForge that United Linux is for real.

Writes O'Gara: "The initiative,
reminiscent of the old failed Open Software Foundation put together to save
Unix from the onslaught of Sun Microsystems, raises a slew of questions such as
whether the foursome will fold their distributions into a single company, how
they intend to share development costs and how they intend to deal with the
proprietary code they have in their distros." Yet, ul-Haque told us the four
companies participating in United Linux will remain separate entities. One question down, 99 to go.

Maybe more intriguing, we think, are the questions facing Red Hat as a big, new
competitor is about to spring to life. CEO Matthew Szulik doesn't seem too
concerned at first blush. "I think [the coalition] is fantastic," he says. "The
more people that are contributing to Open Source and GPLed software, the
better -- if it's true." But as the realization sinks in, Szulik must be asking
himself:

What does this mean for Red Hat?

Red Hat is the Linux company to the uninitiated, especially in the lucrative U.S. market. It's an enviable
position, and many observers say that if there were only one distribution
it would speed the acceptance of Linux by commercial and private entities. That
perception of "Linux 7.2" has helped Red Hat establish dominance, but it has
also helped Linux establish a presence.

Now we have United Linux, positioning itself squarely in Red Hat's former spot
as the Linux. Red Hat even describes itself this way: "the largest and
most recognized provider of open source technology." The United Linux
announcement is marketing at it's most excellent: giving the public what
they want. It's business strategy at its finest: Let's find out what makes
Red Hat so successful and imitate it. They're nosing in on Red Hat's territory
by invading and taking over the paradigm. Saying, "we are the 'go-to' company
for all your Linux needs." No more worry about this distribution and that
distribution and trying to get support from all the different companies and make
it all work together. They're becoming what Red Hat has been, and they're coming
off the block with a certain amount of strength in niches and geographical
advantages.

Niches

Conectiva: Small, easy-to-use distro customized for Latin market
Caldera: Unified Linux and UNIX solutions, servers, education
SuSE: World's largest development team, largest existing Linux knowledge
database
Turbolinux: Multiplatform clusters and distributed computing

Red Hat: Servers

Geographical reach

Conectiva: South America
Caldera: Primarily the United States, but has a presence in about 20 countries
SuSE: Strong in Europe
Turbolinux: Strong in Asia Pacific

Red Hat: United States, parts of Europe including Spain, India, Japan, United Arab
Emirates

Red Hat may still have the advantage when it comes to finances, however. Turbolinux, Conectiva and SuSE are privately-held companies and don't readily share financial information -- although with well-publicized layoffs and reorganizations, it isn't hard to come to a conclusion: They ain't rollin' in it. Caldera trades under CALD on the Nasdaq and has suffered the same steep decline in prices many other tech companies have in the past year and a half. The earnings announcement this morning puts the company at minus 47 cents per share for the second quarter of 2002.

Red Hat, on the other hand, is trading at $4.51 per share, an astoundingly high figure compared to other dot-com boom entrants. On the other hand, Red Hat's revenue, at $21M, isn't too much greater than Caldera's, at $17M. Still, United Linux may have a hard time outdoing Red Hat from a purely monetary standpoint.

After the announcement, the rest of the questions concerning United Linux will
be answered. But the questions will just be beginning for Red Hat and
Szulik. There will be much attention focused on United Linux in the coming days,
much effort expended to brand the product, create expectations, and overshadow
Red Hat's dominance in the public's mind. Because it has heretofore positioned
itself as "the biggest and most recognized," look for Red Hat's strategy to
change in the coming months, in response to an even bigger and perhaps
eventually more recognized player: United Linux.

Click Here!