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Red Hat hears desktop Linux calling

By Stephen Shankland
Staff Writer, CNET News.com
June 24, 2002, 4:00 AM PT

Red Hat is warming to the use of the Linux operating system on desktop computers, a difficult market where customers are picky and Microsoft is the leader.

Raleigh, N.C.-based Red Hat, the leading seller of Linux, gets the vast majority of its revenue from the use of its product in servers--more powerful networked computers typically run by technically proficient administrators. But cost and security issues with Microsoft's software, combined with the arrival of the Mozilla Web browser, have triggered Red Hat's interest in a desktop Linux, Chief Executive Matthew Szulik said in an interview with CNET News.com.

"We think we can deliver a fully integrated solution that is based on open-source technologies," Szulik said. A year ago, information technology executives didn't consider the issue, but "I would say it's accelerating (and) showing up in three to four conversations a month now with chief information officers."

Open-source software may be freely shared, modified and redistributed, in strong contrast to Microsoft's proprietary tools. One key difference between the two: a company purchasing a fully open-source software package such as Red Hat's Linux may install it on as many computers as desired. With Microsoft, licenses must be paid for depending on the number of users involved.

Breaking into the desktop market will be tough. Although Redmond, Wash.-based Microsoft isn't dominant in servers, it has 94 percent of the market for operating systems that run on "clients" such as desktop and laptop computers. Linux claims only 3.8 percent of that market, said IDC analyst Dan Kusnetzky.

"Linux is a competitive threat to Microsoft on the server. It really isn't a direct threat on the desktop," Kusnetzky said.

While Red Hat is studying the possibilities of a desktop Linux, others are trying to make money off the idea. CodeWeavers sells a product called CrossOver Office that lets Microsoft Office run on Linux systems, while Lindows is trying to create a version of Linux that will run Windows software in general.

Price persuasion
But there's room for competition. For example, a company with 10,000 employees using computers only for basic tasks could buy a single copy of Linux for $49, compared with Windows XP, which would cost somewhere around $2 million, Kusnetzky said. That's a lot cheaper, even factoring in the cost of hundreds of thousands of dollars for in-house support of the Linux systems.

Microsoft disagrees.

"While we have seen an increase in interest in Linux on desktops, customers who have done rigorous evaluations are overwhelmingly telling us that Linux's total cost of ownership is considerably higher, and the business value is lower than Windows," Peter Houston, senior director of Microsoft's Windows Server Group, said in a statement. "Key factors included the cost of desktop management, retraining costs and availability of applications."

Szulik is aware of Microsoft's dominance. "You've got to solve the .doc problem first," he said, referring to the file format used by Microsoft Word but not shared by Microsoft. "There are an awful lot of people who have become very familiar with the Microsoft desktop."

Compatibility with Microsoft Office file formats is a big problem. Microsoft Office has about 92 percent of the market for packages of programs such as word processors and spreadsheets, Kusnetzky said.

Sun Microsystems partially addresses the issue with its StarOffice software and the open-source OpenOffice project on which it's based.

But Microsoft can play the game of changing those file formats when it wants and indeed has done so, Kusnetzky said. "The name of the game is Microsoft wins and you lose," he said.

Outflanking Microsoft
The key to open-source software success on the desktop is to outflank Microsoft, not to clone Microsoft's Windows and Office, Szulik said.

Combining Linux with a GNOME or KDE interface and the open-source Mozilla browser, there's room to compete by selling inexpensive computers used only for basic tasks, he said.

"I think the Mozilla team has made great progress. I'm a strong Mozilla user myself. That has been a key implementation that makes the desktop more interesting for our company," Szulik said. "Our research and our customers tell us they're basically using PCs for (Web) surfing or for opening mail attachments--doing very basic, lightweight work."

Kusnetzky sees some possibility for that market. "An awful lot of people in the consumer environment are...using desktop computers just to write memos or letters, access their Internet service provider, and send and receive e-mail," he said.

Szulik isn't the first to observe that many PCs are over-muscled for their users' needs. But many companies have tried and failed to make cheaper PCs, including some that used the Linux operating system.

The list of canceled Internet appliances includes the Linux-based Gateway-AOL Connected Touch Pad, Sony's eVilla, Netpliance's I-opener, 3Com's Audrey and, most recently, Compaq Computer's iPaq appliance.

Countries whose general population can't afford high-priced computers also are a reasonable market. Red Flag Linux is making major inroads in China, Kusnetzky said, but worldwide and in Asia, Red Hat leads in desktop Linux market share.

Szulik knows that the bulk of his company's revenue comes from servers, though. Red Hat competes with Microsoft, but its current marketing is aimed at weaning customers from Sun servers.

"We have two competitors. One's in Mountain View (Calif., where Sun has offices) and the other is in Redmond," Szulik said. "The road to Redmond is through Mountain View."