Penguins: Name Your Price

Groups inside SCO and Sun Microsystems are exploring the possibility of buying a Linux vendor

If you can't beat them, buy them. That's the motto of some groups inside SCO and Sun Microsystems, which are exploring the possibility of buying a Linux vendor, say highly placed sources at Caldera Systems, SCO, Sun and TurboLinux.

Both SCO (The Santa Cruz Operation) and Sun are looking at either Caldera Systems or TurboLinux, sources say. Sun and SCO both declined to comment about possible Linux deals. But even as they eye the open-source waters, it's unclear whether SCO and Sun will take the Linux acquisition plunge because of their respective ties to Unix.

In SCO's case, there's considerable resentment in some circles toward Linux. As one SCO employee puts it, "we work our butts off for years on OpenServer and UnixWare and then we're supposed to make nice with these guys? Forget that."

Ironically, Caldera is backed by ex-Novell chairman and CEO Ray Noorda, who tried to corner the volume Unix market earlier this decade, before Novell threw in the towel and sold UnixWare to SCO.

Bad feelings aside, SCO has been making nice with Linux for some time now. Besides being a member of Linux International, SCO has invested in LinuxMall, a leading direct vendor. In August, David Taylor, SCO's VP of professional services, launched the SCO Linux and open source professional service team. The group provides Linux audit and deployment services. SCO also is working hand-in-glove with TurboLinux, marketing Linux with SCO's professional services.

The results look promising. SCO's Q4 revenue was a record $58m (£35m) and the company's stock has climbed from $3 to $13 over the last several months. "We're really doing well because Linux has made Unix popular," says one SCO source. "Our Linux moves have bought us credibility."

But for how long? If low-cost Linux continues to gain momentum on Intel servers, it could injure SCO's Unix sales. And if SCO buys a Linux player, the company risks cannibalising its revenue stream even faster.

Sun faces a similar predicament. Its open-source moves, such as buying StarOffice, are a matter of public record. And Sun's well-received open-source program, lxrun, allows users to run Linux programs on Solaris. But the company's strategy for Linux could get much more complicated.

Publicly, Sun maintains that Solaris is still its one, true OS on high-end computers. Still, the company is hedging its bets on the low-end, where it has spent more than a year touting UltraPenguin-a Sparc Linux port-for Sun's Ultra 5 workstation.

UltraPenguin 1.1.9 is an improved version of Red Hat Linux for Sparc 5.2. It supports both 32 and 64-bit Sparc processors. The bigger question, however, is Sun's strategy for Solaris on Intel. Sources say Sun insiders are mulling a move to support Linux--in addition to Solaris--on Intel.

The move would permit Solaris to maintain its lead high-end servers, leaving mainly Linux to compete with Windows NT on departmental servers and commodity hardware. As part of its potential Linux-on-Intel initiative, sources say Sun has approached both Caldera Systems and TurboLinux about possible business relationships.

While details are sketchy, neither Caldera nor TurboLinux appears to want to sell out. Caldera CEO Ransom Love says he is firm in his commitment to bring his company to a successful IPO. TurboLinux, with its firm financial foundation in Asia, is equally adamant that it's not for sale, says a source at the company.

Whatever course Sun and SCO ultimately take, history indicates that some consolidation is ahead. Just ask Red Hat. With a sizeable war chest from its recent IPO, Red Hat has purchased Cygnus Solutions, a leading maker of software development programs.

This powerful programming tool set gives Red Hat both an OS and development environment needed for Red Hat to emerge from being 'just' an operating system company. The strategy mirrors Microsoft's early business strategy, which helped developers write apps for MS-DOS.

Red Hat may not be done shopping yet. Prior to its Cygnus purchase, Red Hat had been pursuing leading Linux support company, Linuxcare, according to Red Hat CEO Robert Young.

Could another Linux distributor be a possible target? Stay tuned. Linux, the business market, is heating up just as fast as Linux the technology.

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