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Oracle Puts The Whammy On Red Hat

In one fell swoop, Oracle CEO Larry Ellison last week both blessed Red Hat and blew it out of the water as he unveiled Oracle's own Linux support offering.

Oracle Linux

On the one hand, Oracle dubbed Red Hat Linux as the de facto enterprise Linux standard. On the other, Oracle now competes full-on with Red Hat for enterprise support dollars with its own Linux support that is less than half the cost of the Red Hat service. Red Hat makes moneyor doesn'ton support contracts. Oracle will also offer indemnification for Red Hat Linux.

In addition, Oracle execs said they can and will strip out Red Hat trademarked and copyrighted material and offer enterprise Linux on their own. So the database and enterprise applications giant is now also an operating system player.

"On the cynical side, this also might be a preliminary salvo in a PeopleSoft-style takeover of Red Hat," said Tim Gotham, president and CEO of Premier Design Systems, an Oracle solution provider in Minneapolis.

"The two companies appear to complement each other and with Ellison's empire-building strategies, it's not a bad move to lower baseline purchase price by 30 percent with one announcement," Gotham said.

Ellison, for his part, said the move will give customers an alternative to Red Hat. "If you are Red Hat Linux customers, you now have a choice. You can very easily switch from Red Hat support to Oracle support," he said to applause last week at his OpenWorld keynote in San Francisco.

Customers need not even be running Oracle databases or middleware to purchase this option. Ellison characterized Oracle's support organization as the largest software support group in the world, spanning 145 countries and 27 languages.

In Ellison's analysis, Oracle support will cost $399 per year for a two-CPU box vs. $999 per year from Red Hat. A Basic Oracle option is $99 per year vs. $2,499 for Red Hat Enterprise Linux Premium support. And until Jan. 31, 2007, customers can get the Oracle support for a 50 percent discount. Existing Oracle customers can try the new support options free for 90 days.

Ed Screven, Oracle's chief architect, said the new Oracle Linux offering, which Oracle said is priced more attractively than Red Hat's, definitely gives Oracle more "opportunity" in the SMB market. "It's a high-quality operating system with great support for a very reasonable price," Screven said. "That clearly gives us an entre where we don't have to rely on Red Hat."

Furthermore, Screven said Redwood Shores, Calif.-based Oracle is interested in exploiting the open- source software model of acquiring and maintaining software "through a connected network" with its other software products.

Red Hat painted the Oracle swipe in a positive light. "Oracle's announcement further validates open source and Red Hat's technical leadership," the company said via e-mail. "We will continue to optimize Red Hat Enterprise Linux for Oracle and compete on value and innovation."

Raleigh, N.C.-based Red Hat's stock suffered, closing last Thursday down 24 percent to $14.83.

The tone of a question from the Oracle OpenWorld audience summed up overall reaction at the show: "Is killing [Red Hat] an unintended side effect?" Ellison was asked.

Ellison said he expected Red Hat would continue to compete "very aggressively."

At least one Oracle partner sees opportunity in the deal. This will lead to "lower TCO, one neck to chokewe're loving it more dollars for services," said Scott Jenkins, managing director for the EBS Group, Lenexa, Kan.

Ellison said the move should clear impediments to widespread Linux adoption in the enterprise. To date, in his view, that adoption has been stymied by a lack of "true enterprise support for the Linux kernel."

"Quite often, bugs get fixed, but they're not fixed in the versions of Linux customers are running. Fixes are not back-ported," he said.

There is also uncertainty about using Linux intellectual property since "SCO started suing everyone in sightcustomers and everyone," Ellison said. "This uncertainty is slowing adoption of Linux in large customers."

Ellison also said the industry must be careful not to "fragment" Linux. However, it was unclear if Oracle support would extend to non-Red Hat Linux distributions.

Oracle executives later said they might look at support offerings for other distributions going forward.

This move could have impact well beyond Red Hat. At least one analyst said it could stymie Microsoft's SQL Server move into the data center.

The relative cost of SQL Server running in a data center compared with Oracle 10g running on Linux in the data center is now roughly equal, given Linux's low cost, said Stuart Williams, analyst at Technology Business Research. "Oracle just cut Microsoft off at the pass," he said.

SQL Server in the enterprise relies on the ever-thickening Microsoft software stack, he noted.

Virtually all of Oracle's business applications run on Linux, with Siebel 8.0 set to bring Linux support to that CRM application by year-end.

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