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IBM cuts Red Hat Linux price for Power servers

While Red Hat's list prices remain unchanged, IBM says new pricing lets it sell the operating system to Big Blue customers for $700 to $1,000 less.

IBM on Tuesday dropped the price of Red Hat Linux on its Power processor-based servers by more than 30 percent, Big Blue has confirmed.

IBM is pushing hard to establish Linux on its Power-based servers, the iSeries and pSeries lines. But in this case, the sales incentive came from Red Hat, IBM said.

"Red Hat reduced their prices, so we're passing the savings along to the customers," IBM spokesman Charles Zinkowski said.

Including a year of Red Hat's basic support, the Red Hat Enterprise Linux AS 3 costs $1,295 instead of $1,992, and including a year of premium support, the price was lowered from $2,988 to $1,995, IBM told customers in the United States. The previous prices matched Red Hat's list prices.

Red Hat spokeswoman Leigh Day said the company hasn't lowered its list price, but declined to share pricing specifics about its arrangement with IBM. However, the company's goal is to have 70 percent of revenue come through indirect sales channel partners such as IBM, she added.

The price cut came at the same time IBM began shipping Red Hat's Linux directly with the servers. Previously, IBM took Linux orders but passed them along to the Linux seller for fulfillment.

Linux on Power is a rarity today. The open-source operating system is most widely used on servers using "x86" chips such as Intel's Xeon or Advanced Micro Devices' Opteron, while IBM's pSeries mostly uses the AIX operating system and iSeries uses OS/400.

Red Hat's chief Linux competitor is Novell's SuSE Linux, which supported IBM's full range of servers more eagerly than Red Hat; IBM sells SuSE Linux Enterprise Server 8 for $1,488.

The number of customers paying for Red Hat's product support subscription boomed in its most recent quarter. The Raleigh, N.C., company said increasing sales volume lets it cut prices while preserving overall profit margins.