It's the first time Dell has invested in a private firm, said a Dell spokesman, though he declined to reveal the monetary value of the investment.
This is also the first investment from Direct Invest, a recently formed private investment division at Dell. Headed up by former Dell treasurer Alex Smith, Direct Invest will work with venture capital firms to seek out private investments, said another Dell spokesman. Initially, Direct Invest will focus on opportunities in electronic commerce and storage technology, among other areas.
"[The Red Hat investment] is to further Dell's commitment to making Linux a success in the corporate market," he said. Chief executive Michael Dell, meanwhile, makes a number of venture investments through a separate fund.
Red Hat, which shipped 400,000 copies of Linux last year, is basking in the booming popularity of the operating system. The company already has received investments from Intel, IBM, Compaq, Oracle, Novell, SAP, and Netscape (now owned by America Online).
Dell offers Linux preinstalled on servers and workstations and, as previously reported, said it will offer Linux preinstalled on its OptiPlex business desktops in the second quarter of 1999, a Dell spokesman said.
In addition, the Burlington Coat Factory will buy 1,250 Dell OptiPlexes with Linux for about 250 of its 264 stores by the end of summer. The computers will be used for several tasks, including connecting to the company's intranet, Oracle database applications, merchandising system, and a new gift registry system, said Mike Prince, chief information officer at Burlington Coat Factory.
Burlington chose Linux because it's a stable operating system and Burlington already is comfortable with Unix, Prince said. Linux is a clone of the Unix operating system. In contrast, rolling out Microsoft Windows NT machines would have required the company to learn a new operating system.
The tie between Red Hat and Dell is interesting in light of Dell's historically close alignment with Microsoft Windows machines running on Intel-based systems.
Dell's Linux adoption, though, is simply in response to customer needs, the spokesman said.
Linux has been under development for years, but has begun shaking up the operating system landscape in recent months. It combines the low price of Windows with the power of Unix, and many see Linux as competing with Windows NT.
Microsoft, on the other hand, says Linux competes mostly with Unix. However, several companies who sell their own versions of Unix--including HP, IBM, Compaq, Sun, and Silicon Graphics--have embraced Linux in varying degrees, arguing that it will boost the success of their own Unix versions.
Red Hat is one of several distributors of Linux. The company argues that Linux forces operating system companies to compete on the basis of service and support because Linux, an open source operating system, lets customers fix problems for themselves or hire whoever they want to fix the problems. The result is that companies are freed from being "locked in" to one particular operating system vendor, Red Hat chief executive Bob Young has said.