Oracle to offer Red Hat Linux support

Announcement marks the first time a major computing company with Linux ties will compete directly with the Linux seller. Complete OpenWorld coverage: From Dell-AMD to Web 2.0

SAN FRANCISCO--Oracle will sell support to Red Hat Linux customers and offer its own free clone of the open-source operating system, posing a major competitive challenge to the leading Linux seller.

"As of this moment, Oracle is announcing full support for Red Hat Linux," Chief Executive Larry Ellison told thousands of attendees at the Oracle OpenWorld conference here on Wednesday. "If you are a Red Hat support customer, you can very easily switch from Red Hat support to Oracle support."

Larry Ellison

Becoming an operating-system company is one of a series of bold attempts at growth by the Redwood Shores, Calif.-based software company, which in recent years also has acquired small and large rivals. Many major computing companies have embraced Linux, but until now, all have chosen partnerships with Linux companies rather than direct competition.

Ellison argued that customers of Unbreakable Linux 2.0 will enjoy lower costs, better bug fixes and better legal protections than with Red Hat. Software updates cost $99 per server, while technical support costs $399 for a two-processor server and $999 per year for a larger system, Ellison said. And unlike Red Hat, Oracle will let anyone download the software for free.

"We will backport your bug fixes" to earlier Linux versions, he said. "We will indemnify you from intellectual property problems. And our support costs way less than half of what Red Hat charges," Ellison said.

Red Hat trimmed?
In after-hours trading, Red Hat's stock plunged 16 percent, or $3.16, to $19.51, but CEO Matthew Szulik was unfazed by Oracle's move. He said the Linux seller isn't re-evaluating its pricing, its relationship with Oracle, its plans to expand its open-source products higher up the software "stack," or its relationship with Oracle rivals.

Over the last four quarters, 99 out of 100 enterprise accounts that were up for renewal did renew, and greater than 40 percent expanded their Red Hat Enterprise Linux penetration. "Clearly, we must be doing something right," Szulik said of the company's support subscriptions. Of the lower stock price, he said, "Sounds like a buy."

But because Oracle is Red Hat's largest software partner, its Linux move could seriously encroach on Red Hat's customer base, said Jefferies & Co. analyst Katherine Egbert. "They're very influential in selling Red Hat Enterprise Linux. We don't know how Red Hat is going to respond yet, but given this, why would you go to Red Hat?"

Outside Oracle's customer base, the effect on Red Hat likely will be limited, predicted Raven Zachary, an analyst with the 451 Group. "I don't see non-Oracle database or applications customers selecting Oracle as its Linux provider any time soon," he said.

Oracle, like the CentOS project, wants to clone Red Hat's Linux based on the source code produced by the company, not create a new Linux variant. And Ellison promised that software certified for Red Hat's Linux will still work.

"If your application runs on Red Hat today, that application will run unchanged when you're getting Oracle support," Ellison said. "It's very important not to fragment the Linux market. Every time Red Hat comes out with a new version, we're going to sync our version with that version. All we add is bug fixes."

Oracle will sell support to any Red Hat Linux customer, not just customers of Oracle products, Ellison said.

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