Linux vendors facing test

www.infoworld.com |  Operating Systems

DESPITE THE recent stock slide of several top-tier Linux companies, analysts and executives in the open-source community said that leading Linux vendors remain viable enterprise suppliers.

Several high-flying stocks, including Red Hat, VA Linux Systems, and Andover.Net, have been steadily trending down since their record-setting IPOs last year. But what drove stocks down -- making financial analysts, and perhaps some Linux users, take a closer look at the prospective fortunes of Linux -- was the less-than-spectacular offering by Caldera Systems and the unexpected decision of Linuxcare to pull back its scheduled IPO and replace its CEO, Fernand Sarrat.

But Linux vendors this week said that these happenings will not greatly restrict their ability to invest in the future, or even portend a near-term shakeout.

"We see a lot of this recent activity as short-term fluctuations and are not worried by it. Our goal when we started this thing was to build a great technology company over the next 20 years, and we are only five years in now," said Bob Young, chairman of Red Hat, the leading distributor of Linux operating systems, in Carey, N.C.

Analysts pointed out Linux's continued momentum among larger companies as a low to midrange server, along with its somewhat brightening prospects on the desktop.

"We have deployed a few dozen Linux servers throughout the company for a number of different applications, which has worked out really well for us for a number of technical and financial reasons. We also plan to buy in to their [Red Hat's] services programs as well," said Dan Levitt, a LAN administrator at a large Canadian-based railroad.

Some of the skepticism is tied to the fact that many Linux-based companies have promised growth via their services and support businesses which, in the majority of cases, has failed to materialize. Although many of those companies have signed long-term service and support deals with larger corporate accounts and other vendors, those revenues have yet to jump to the bottom line.

"Those revenues will come. We jumped from $11 million to $42 million last year. We believe we can grow those revenues at 100 percent in each of the next two or three years and they will be driven by our services business," Red Hat's Young said.

The number of Linux vendors will grow in the short term, but eventually consolidate at the top tier, said Dan Kusnetzky, director of operating environment research at IDC, a market research company in Framingham, Mass. Although there are only six or seven top companies generating sizable revenues, IDC recently has identified as many as 145 different distributions of Linux.

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