IBM brings Linux, Unix closer

San Francisco sidewalks are covered with penguins and peace signs to celebrate IBM's new AIX, a Unix-based operating system that natively runs Linux applications.

You might call it high-tech's odd couple--IBM's white shirts, ties and pocket protectors paired with the ripped T-shirts of Birkenstock-wearing, free-software-loving Linux programmers. But IBM has embraced the open-source movement, and there's evidence it's more than just a mid-life crisis.

Big Blue is creeping up on the until-now much cooler Sun Microsystems in the crucial $60 billion high-ticket server market. And Monday brings news that IBM and Linux are going to get even cozier, as Big Blue announces the first Unix-based operating system that natively runs Linux applications.

Last week was a bad one for Sun's Scott McNealy. He had to explain to investors why the company's net income fell 73 percent in one year, and why the company might not be out of the woods yet. Worse still, he had to do it at nearly the same time that IBM's Lou Gerstner was gloating about a blowout quarter during his analyst conference call. By week's end, IBM's stock had risen almost 20 percent.

This week, Sun finds itself beating back more IBM good news, as the company trumpets the first version of the powerful Unix operating system that natively runs freely available Linux applications. Unix systems have largely taken on jobs once reserved for mainframe computers, such as massive transaction-processing systems.

Sun is still the dominant player in the lucrative enterprise server business, where machines routinely cost $1 million, but it is no longer the 800-pound gorilla. IBM has been slowly pecking away at Sun's lead - for example, in the U.S. market for Unix servers, Sun's 42 percent share is threatened by IBM's 28 percent, up from 12 percent just two years ago, according to International Data Corp.

IBM credits its embrace of Linux for part of its success; Sun users must stick with Sun's Solaris operating system and applications.

"It's a validation of our strategy. We think Linux is a game changer," said IBM's Tim Dougherty. "This gives our customers a clear view that 'I can adopt this technology.'"

A spokesperson for Sun dismissed IBM's market growth, saying it's more a reflection of how small IBM's share was last year. Some analysts agree.

"Realistically speaking, Sun is still dominant," said George Elling, an analyst at Lehman Brothers. "Even with the poor results, last year they grew about 40 percent, then 60 percent, and IBM was nowhere."

Linux is growing
Still, the embracing of Linux has had a significant impact on IBM's sales - according to the company, more than 20 percent of the smaller, Intel-based servers IBM sold in last year's fourth quarter were running Linux. IBM doesn't make anything on the software, since Linux is free, but it does get the hardware sales.

Monday's announcement takes the Linux relationship a step further, as the company carries the open-source flag into the so-called mid-range server market. The announcement comes even as Big Blue has begun aggressive marketing campaigns touting the old company's hip Linux image - the ads include chalk drawings of a peace symbol and the familiar Linux penguin appearing on busy San Francisco sidewalks.

Making IBM's flavor of Unix - called AIX - compatible with Linux applications can help sales in two ways.

First, commercial facilities running IBM's server hardware can now practically look to the open-source community for software solutions. Currently, Linux applications generally don't run on Unix-based operating systems without at least some painstaking tweaks.

"Any open-source software was always a struggle on AIX," said Steve Kellogg, who runs Penn State University's networks. Penn State was a beta test site for IBM's new product. He said the new AIX eliminates many headaches that he normally encounters trying to port applications written for Linux over to a Unix platform. "I challenge newbies in my organization to get the source code, and then you start fighting," Kellogg said. "It's a process that's never much fun. It's possible, but not fun.... Well, we haven't found one application that didn't compile correctly on the new AIX."

Targeted for servers
On the other hand, IBM also hopes to coax some all-Linux shops that are running up against hardware limitations to jump up to an IBM server. Currently, the Linux operating system can only support PCs with four processors--AIX machines often have 24 or 32 processors. Current all-Linux shops could shift to IBM hardware without having to rewrite all their other software for AIX.

"This announcement will give the CIO that much more negotiating power," said Brad Day of Giga Information Group. "They can use it to drive for discounts with Sun, or in some cases the IBM product will be a far more compelling story. They're definitely firing a shot across Scott McNealy's bow."

For its part, Sun has already made pre-emptive announcements in this same class of servers, seeking to head off IBM's assault at the pass. It introduced a new line of mid-range servers it calls "Sun Fire" in March, and it dropped prices on the machines on Thursday.

But IBM believes the key factor in the battle is the buzz around Linux. Even if commercial shops don't want to jump full-force into open-source software, many at least want to keep their options open, and right now, that sentiment favors IBM.

"Certainly there are a lot of believers in Linux," Elling said. "Only time will tell."


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