Oracle bloodies Red Hat’s nose; more damage to come?

* Oracle plans to offer its own version of Red Hat

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Oracle’s move to lure Oracle/Red Hat users to buy support from the database company, instead of the Linux vendor, could be a double-edged sword for users of each respective technology.

Oracle said last week that it intends to offer its own version of Red Hat, along with services, such as software patches. Oracle will also offer support for Oracle customers who run Oracle database and other applications on Red Hat servers. This Unbreakable Linux 2.0 will cost $99 per year for support services and updates. Red hat charges from $399 to $999 per year to support Red Hat Linux servers of varying sizes.

One way to look at it is that users of Oracle/Red Hat servers are primarily Oracle application users first, and Linux users second. For businesses that run entirely on Oracle, who would be better to offer support and advice on how to fine-tune, maintain and support Linux as a foundation for Oracle apps? Plus, the company is offering to support its Red Hat clone at a fraction of the cost of Red Hat.

Red Hat counters this argument by saying that Oracle’s efforts will lead to two different versions of Red Hat, which may be incompatible with each other. Also, Red Hat’s hardware certification and other system guarantees will not be applicable to customers who switch their service or code over to Oracle’s offerings.

According to a statement on Red Hat’s Web site, Oracle’s derivative Red Hat “will not be Red Hat Enterprise Linux and customers will not have the assurance of compatibility with the Red Hat Enterprise Linux hardware and application ecosystem.”

In the short term, Oracle has really done a number on Red Hat’s stock price: as of Friday, the company has lost around 35% of its market value as its stock fell over 25%. In the long term, it remains to seen who Oracle/Red Hat shops will trust more, and whether or not Red Hat’s business model will be viable if Oracle is successful in its Linux endeavors.

Copyright © 2006 IDG Communications, Inc.

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