RED HAT HOLDS LINUX LEAD, BUT RIVALS GROWING

September 8, 2000

COMMERCIAL NEWS

San Diego, CALIF. — Stephen Shankland reports that Red Hat has more of the Linux market than its next five competitors, but those competitors all are increasing their share faster, a study has found.

Red Hat shipped 48 percent of the copies of Linux that were sold in 1999, according to market research firm International Data Corp. But while that market grew 89 percent from 1998 to 1999, Red Hat’s share of the market grew only 69 percent, said IDC analyst Dan Kusnetzky.

Second to Red Hat was German Linux seller SuSE, with 15 percent of the market, followed by Caldera Systems and TurboLinux, each with 10 percent. MandrakeSoft in France had 4 percent, Corel accounted for 1 percent, and others claimed 11 percent, Kusnetzky said.

Linux companies argue there is more competition between Linux and other operating systems than there is among versions of Linux itself. But Red Hat’s aggressive push to have its brand name associated as closely as possible with Linux reflects the land grab under way as companies seek to establish as much dominance as possible of the up-and-coming operating system.

“I think Red Hat has done an absolutely marvelous job of creating a brand image,” Kusnetzky said, noting that a red hat he carries as a prop for speaking engagements has provoked questions about the Linux company in at least 16 different cities across the Americas.

TurboLinux growth led the pack at 450 percent from 1998 to 1999. SuSE and Caldera each grew at 175 percent. Corel and MandrakeSoft growth rates weren’t available.

Linux has become a credible alternative to Microsoft Windows, Sun’s Solaris version of Unix and other operating systems, but is used chiefly in low-end servers. Earlier IDC research showed that Linux has grown to encompass 25 percent of the server operating system market, second only to Windows’ 38 percent.

But the nature of Linux makes it fit awkwardly into conventional market-share counting methods or other popularity measurements. A copy of Linux may be installed on as many computers as a person wants, and the operating system may be downloaded for free. IDC counts only copies that customers paid for, Kusnetzky said.

For example, Red Hat’s Linux is used in digital video recorders from TiVo, server appliances from Cobalt Networks and hundreds of VA Linux Systems servers sold to Akamai. But because Red Hat doesn’t necessarily get revenue for these types of products, IDC won’t count them in its studies.

“Sometimes market research firms are facing a problem that’s impossible to solve,” Kusnetzky said. “It’s really difficult when you have to figure how you count things uniformly across different software markets and the markets all operate by different rules.”

The change also affects Sun Microsystems, which this year made its new Solaris 8 operating system a free download or a $75 package including CDs, instruction manuals and accompanying software. Today, the company said it had distributed 629,413 free copies of Solaris so far, but Kusnetzky said free copies won’t show up in IDC’s market-share studies.

“I’m not sure Sun is going to like that,” Kusnetzky said.

IDC is considering adding a new counting technique that will include a separate chart that totals free copies of operating systems, he said. That information would come with the major qualification, though, that the figures are from the companies involved: Without financial data from revenue, IDC can’t confirm the statistics, he said.

The IDC market-share study doesn’t reflect the complete business model of Linux companies. For example, Kusnetzky said services, hardware and consulting revenues go into different categories that IDC measures. And Corel is likely to take a hit in next years’ study, because IDC plans to split off some of the revenue it earned into categories for other software such as word processors, Kusnetzky said.

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