On Tuesday, long-time Microsoft ally Intel Corp. and rival browser maker Netscape Communications Corp. will announce an investment in Red Hat Software Inc., a distributor of the alternative operating system Linux, according to a source familiar with the deal.
The move is a major symbolic blow to Microsoft Corp. (Nasdaq:MSFT), which has been pushing Windows NT server as a solution for Internet Service Providers.
The announcement is expected to be made at ISPCon Fall '98 in San Jose, Calif., during a presentation on Linux's future in business. Intel VP and Director of Sales and Marketing Sean Maloney, Netscape co-founder Marc Andreessen, and Linux creator Linus Torvalds are expected to be on hand for the event. The extent of the investment was not available but the source described it as a "minority" stake.
It's venture time
Two venture capital firms, Benchmark Capital of Menlo Park, Calif. and Boston-based Greylock will also make investments in the software start-up.
|Have an opinion on this story? Add your comments to the bottom of this page.|
According to William Kaiser, general partner with Greylock, the deal is "imminent."
"It's about support. It's about brand. And it's about quality," he said. "There is nothing special that Red Hat has, except that they are making Linux respectable."
The deals between the two venture capital firms and Intel and Netscape were at first separate. "Then Bob Young, president of Red Hat, thought it would be best to do the announcements all at once," said Kaiser.
When asked about Intel's and Netscape's involvement, Kaiser said that "it all sort of came together at once. We are obviously excited to have those leaders investing in the company as well."
The money from this private round of venture capital will most likely go towards creating an enterprise server group within Red Hat, said the source, who would only comment on condition of anonymity. Red Hat supplies products and support for Linux, which is a free Unix-like operating system.
Intel: Same ol' strategy
While Intel would not confirm the move, spokeswoman Jane Rauchhorst said that their interest in Linux was nothing new.
"We are extremely interested in growing our server base," she said. "This is really consistent with what we have always done."
Netscape and Red Hat would not comment on the deal.
Intel has already revealed that the company intends to support a 64-bit version of Linux with their Merced chip and is working on adding its Wired for Management features -- aimed at making Linux easier to install in the corporation -- into Linux.
In addition, Intel has already revealed details of its universal driver initiative, which aims to make developing Linux applications much easier.
Intel vs. Microsoft?
Despite Intel's shushing of the deal's impact on its relationship with Microsoft, at least one analyst thought the political implications were unavoidable.
"The question now is what is going to stand in the way of Microsoft and their Windows juggernaut?" said Martin Marshall, an analyst at Internet watcher Zona Research Inc. of Redwood City, Calif. "Linux is a natural for this."
At the same time, Marshall noted that while such a deal would be "a further legitimization of Linux," the technology would still be an alternative to mainstream server operating systems. He added that "Is it going to turn the world around? No."
Other observers also played down the implications.
"I am a little less religious about the anti-Microsoft sentiment, because there is an either-or mentality," said Greylock's Kaiser. "I don't think anyone thinks that Linux is going to displace Windows NT."
Red Hat Linux = THE Linux?
And perhaps vendors of Unix -- and Linux -- should be the ones worried about the deal.
"This has a bigger effect on the SCOs of the world than the Microsoft Windows NTs," Marshall said.
Making one distribution of Linux "official" could steal market share away from the myriad Unix and Linux platforms. What's more, it could turn Red Hat Linux into a sort-of authorized version -- a scenario despised and feared by most Linux developers.
Indeed, at least one Linux dealer is worried.
Scott McNeil, president of North American operations, for Linux provider and Red Hat rival S.u.S.E. Inc. said he thought Intel's backing of a single Linux vendor would be a bad idea. "They wouldn't want to cut their throats," he said.