The acquisition of Atlanta-based Planning is part of Red Hat's strategy to profit by providing services for the open-source Linux operating system, which is available for free or a very low cost. Red Hat has been concentrating on comparatively basic services such as technical support for Linux and automated Red Hat Network management software, while Planning offers more sophisticated consulting services.
Red Hat, based in Research Triangle Park, N.C., said the Planning acquisition was made through a stock swap worth $47 million and accounted for as a pooling of interest.
With the acquisition, Red Hat will gain roughly 200 engineers and consultants whose expertise lies in helping customers design, install and run their computers and networks. Planning's clients include AT&T, Home Depot, Delta Air Lines, BellSouth and several government agencies. Planning, founded in 1992, has not been a Linux-specific company.
The acquisition means that Red Hat's vision for how to profit by Linux has grown another step closer to IBM's. IBM global services division does much the same thing as Planning, but on a larger scale.
Publicly traded companies Red Hat, Caldera Systems and VA Linux Systems, along with privately owned competitors such as Turbolinux and SuSE, are trying to use the popularity of the open-source operating system to carve a niche in the computer industry. Linux is rapidly spreading in popularity, but it's been hard for companies to convert that acceptance into profit, and services has long been the way many hope to accomplish that.
For example, Red Hat launched the Red Hat Network as a subscription system that automatically finds and installs updates to Linux and accompanying software. Red Hat argues that the Red Hat Network could be a service resold by companies such as IBM.
Other Linux-related companies also want to beef up their services.
Turbolinux acquired Linuxcare last week to do just that. Months after the launch of Red Hat Network, stumbling rival Linuxcare unveiled its own managed services, which provides a range of options to customers who would prefer to hire a third-party to handle tasks such as software updates for Linux servers.
VA Linux Systems, which brings in about 80 percent of its revenue from computer sales, also has been pushing services as a way to differentiate itself from companies such as Dell Computer that already have vast experience in making computers. And Caldera Systems sees its new Volution management software as key to its vision of increasing services revenue.
But not everyone's plans for profits are working out so far. Just last week, VA Linux missed lowered expectations and warned that profitability will arrive nine months later than planned. The company, which has recently issued a string of quarterly revenue warnings, also said it will cut 25 percent of its staff.
News.com's Stephen Shankland contributed to this report.