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3/16/2007
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Red Hat Talks Up Online Open Source Marketplace

Linux leader looks to certify the growing number of open source programs for its operating system and middleware platform.

Red Hat, the most widely recognized distributor of the Linux operating system, has a choice between "standing in the way of all this open source technology or getting on the bus and driving," says VP of engineering Paul Cormier. Last week, Red Hat made a grab for the driver's seat.

Along with the introduction of the latest version of its flagship operating system, Red Hat Enterprise Linux 5.0, Red Hat stated its intention to launch later this year an online exchange of open source applications, certified to work with the new system. Cormier cites Salesforce.com's AppExchange, where third parties offer their applications that work with Salesforce's online sales force management apps, as a model for what Red Hat plans to do. But the more accurate predecessor may be VMware's Virtual Appliance Marketplace, in which VMware certifies that a third-party appliance works with its virtualization product line.

"Red Hat could be at the center of an open source stack offering," Merrill Lynch analyst Kash Rangan concluded in a research report. As it tests and certifies other open source software, it "adds another complementary layer to Red Hat's operating system and middleware," Rangan wrote.

Red Hat will incorporate Amazon.com-like online marketplace features to help small and midsize businesses distinguish among many offerings. For instance, it can offer user feedback, discussion forums, and download counts to indicate the most frequently used software, Cormier says.

Lots Of Linux
Red Hat's third quarter, ended Nov. 30
New customers
12,000
Overall revenue up 45% from a year ago
$106 million
Subscription revenue up 48%
$88.9 million
Earnings down 37%
$14.6 million
Data: Red Hat
"The beta that I've seen is very slick, very intuitive, and should be a winner with both SMBs and enterprises," Matt Asay, VP of business development at open source content management software distributor Alfresco Software, an early participant, says in an e-mail.

The online store, with its ability to offer up classes of open source products quickly, "could drive greater adoption of Red Hat's platform," wrote Rangan. Such an approach may be needed as Red Hat tries to stay compatible with a growing array of open source offerings, in areas such as CRM (SugarCRM and Compiere), systems management (Hyperic and GroundWork) and database systems (MySQL and Enter- priseDB, both of which will be early Red Hat Exchange participants).

Red Hat's independence from major vendors, such as Oracle, may give it an edge as host to such a store, Rangan wrote. Cormier makes a special point of saying that Red Hat continues to partner with Oracle, despite a play by chairman Larry Ellison last year to get Oracle customers who use Red Hat Linux to switch their support contracts to Oracle. "Oracle continues to be a very important partner to us. I have engineers reporting to Oracle's site every day," Cormier says.

THE WAY OF XEN

As for the new version of Red Hat Enterprise Linux, it's most significant feature is support for the open source virtualization program Xen. Xen 3.0, a so-called hypervisor capable of running many virtual machines on each Red Hat Linux server, will let Red Hat users consolidate servers without relying on third-party virtualization vendors such as VMware or Microsoft. Both Windows and Linux virtual machines can run under Xen.

Red Hat is on a roll. In a December earnings report, Red Hat claimed 12,000 new customers in its fiscal third quarter, ended Nov 30. And while earnings for the quarter dropped to $14.6 million from $23.2 million in the year-ago quarter, revenue was up 45% over the same period. Subscription revenue, which comes mostly from customers paying annual support fees rather than buying products, was $88.9 million of the quarter's $106 million total, up 48% over the same period a year earlier.

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