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Linux in the Post-Microsoft World

By Matthew Beale
May 2, 2000 12:00 AM PT

While the so-called "Linux Hysteria" seemed to fade long before the Nasdaq started to sputter, the open-source platform capitalized on Microsoft's antitrust troubles by moving steadily into the server arena and grabbing the attention of Internet-centric operations.

Linux in the Post-Microsoft World

In fact, an International Data Corp. (IDC) study released last week confirmed not only that Linux represents the fastest growing operating environment in the server market, but that its sales are "strongly tied to the Internet."

"More than 40 percent of all spending on Linux servers is for Internet-related applications," commented IDC research manager Michelle Bailey in a Wide Open News report. "Linux servers are now embedded in the Internet infrastructure and are strong competition for NT and UNIX entry servers."

Rising Numbers

Linux made a strong showing in worldwide OS sales earlier this year, reporting 5.4 million copies sold in 1999. The upstart operating system grabbed the number two spot behind Windows NT, beating projections that it would reach the milestone no earlier than 2002.

Though IDC figures show that Linux revenues were only $32 million (US$) in 1999 -- compared to $1.7 billion for Windows NT -- many analysts are eyeing its 166 percent annual growth rate as an indication that Linux and the open-source model will be serious contenders in the years ahead.

The Microsoft Factor

Following the filing by federal prosecutors of proposed remedies in the penalty phase of the Microsoft case on Friday, the industry is struggling to figure out what the landscape will look like once the dust settles.

However, there is likely to be little change in the short term. Microsoft has announced that it will launch an appeal that could stall the imposition of any antitrust remedies for years.

Still, the lasting impact could be profound. According to some experts, a breakup of the software titan could, in fact, drive innovation and create a more vigorous market.

If Microsoft is ultimately split up into "Baby Bills," one of the new entities would exclusively focus on the OS section of the company's business. The rest of the software titan's operations, including the Office applications and the Microsoft Network, would be spun off into one or two other companies.

Despite initial resistance to the plan, investors responded Monday morning by driving shares up some five percent.

The idea is that once a wider range of applications is available for other operating systems, particularly Linux, the new Microsoft divisions will be forced to truly innovate or face the market consequences. In line with the objectives stated by the U.S. Department of Justice (DOJ), the consumer would theoretically benefit.

Returning to the Source

The breakup concept has achieved less than universal endorsement, however, and some analysts believe that such an action would do little more than create smaller monopolies. Many observers prefer a remedy that would open up the Windows source code, making it available to developers to boost competition and create new business opportunities.

The open-source model, where the code is freely available to users -- and thus customizable -- is gaining critical and practical approval.

The imposition of the open-source concept on Microsoft could be sticky in practice, however. Some developers fear that such a move would merely serve to muddy the waters by forcing Microsoft to block the process by any means necessary.

Battlefield Internet

The decision rendered by the marketplace could be more profound than any ruling from Judge Jackson's court, with the Internet itself most likely being the critical front in this war. After all, a driving impetus behind the antitrust case was Microsoft's bundling of its Internet browser software with the Windows operating system.

Linux, which has proven itself on the Web, again stands to benefit from Microsoft's woes, along with such other platforms as BSD (Berkeley System Distribution).

Some Cash for the Titans

For a long time, Microsoft critics have pointed out that the software titan has lagged behind in the constantly moving Internet market. Now some other technology giants are embracing Linux, perhaps out of diminished fear of Microsoft reprisals.

The backing of industry leaders could signify that although Windows still owns the lion's share of the OS market, the post-Microsoft world is, in a sense, already here.

IBM (NYSE: IBM) has significantly expanded its investment in the open-source platform, and recently released new server market offerings in conjunction with Linux vendors Red Hat (Nasdaq: RHAT) and TurboLinux.

A list of the other companies that are working with Linux reads like a Who's Who of the high-tech economy. While Microsoft's future remains somewhat unclear, some of these titans are steadily pushing Linux growth.

Compaq Computer Corp. (NYSE: CPQ), for instance, grabbed the number one position in 1999 Linux-related server sales with $84 million in factory revenue. IBM, Dell (Nasdaq: DELL), Hewlett-Packard (Nasdaq: HWP) and Fujitsu Ltd. were also big winners, rounding out the top five Linux beneficiaries, according to IDC research.

Linux-focused hardware vendors VA Linux Systems and Penguin Computing remained players, capturing a combined total of 47.1 percent of the market for Linux servers.

Kernel Torvalds

On the occasion of the Windows 2000 launch, analysts pointed out that although Microsoft added millions of new lines of code to the system, many of the developers intimately acquainted with the Windows kernel are no longer with the company. The kernel is the center of the operating system -- handling such things as hardware interaction, memory management and security.

Previously, Microsoft suffered incremental "brain drains" as key employees struck out on their own to head software and dot-com startups. The government's antitrust action against Microsoft may cause that phenomenon to become a nightmare for the software maker.

A sudden rise in the departure of core developers could curb the company's efforts to evolve and reassert itself as the OS market dominator, according to some analysts. Microsoft chairman Steve Ballmer has attempted to sweeten the pot for the company rank and file, promising increased stock options to offset recent declines.

The development of the Linux kernel, on the other hand, remains in the control of its creator, Linus Torvalds. With significant momentum propelling the belief that open-source is the more viable and cost-effective option for business, Linux leaders could effect a greater shift in the OS market than the U.S. government.


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