Dell to Factory-Install Red Hat Linux on Servers

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Event Summary

RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--Dec. 6, 1999--Red Hat, Inc., and Dell Computer Corporation today extended their strategic alliance with a worldwide service and support agreement and a commitment from Dell to factory-install Red Hat Linux on all future and currently shipping Dell PowerEdge server models.

Dell, the number No. 2 PC server provider worldwide, was the first major systems vendor to factory-install Red Hat Linux on its servers and workstations. With today's announcement, Dell becomes the first major systems vendor to factory-install Red Hat Linux across its entire server line, making the PowerEdge brand even more attractive as a platform on which to build Internet-based business activities. Factory installation of an operating system (OS) customizes each server to exact customer specifications, which can save companies time and money and ultimately speed the installation and deployment of systems once they reach the customer location. Dell continues to offer factory installation of Red Hat Linux across selected configurations of its workstations and desktop PCs.

Market Impact

This is another big boost for Red Hat. Until this announcement, Dell would only factory-install Windows NT on its servers, other OSes would have to be done through the DellPlus organization. This move will increase market growth for both Red Hat and Dell. In the OS market in general, the increased shipment of the "challenger" (vis--vis Microsoft) OS should lead to diversification. However, within the Linux segment of the market, this will lead to consolidation - at least, until Red Hat's competitors strike their own deals.

However, we believe other Linux vendors will have a more difficult time getting Dell to FIS (factory-install software) their products. Although Dell is willing to ship what customers want, an option must have sufficient volumes before Dell will factory-install it as part of its standard process. Since Red Hat's current market share is ~65% of the Linux market, the remaining vendors (Corel, Caldera, TurboLinux, et al.) may find it difficult to make a compelling business argument for Dell to FIS their product(s).

User Recommendations

This announcement will give fence-sitting users a greater feeling of security regarding Linux's acceptance by the major PC/server manufacturers. In addition, Dell's market share strength will help customers consider a move to Linux which hitherto might have been unthinkable.

There are two issues which recommend against buying one of Dell's Red Hat servers. The first is that Linux still lacks applications relative to the quantity available for Windows NT. The second is that Dell is presently charging more for a Linux-FISed server than for an NT Server-FISed server. A similarly equipped PowerEdge 6300, enterprise-class server, costs around $100 more for Linux than for NT Server with 10 licenses. Not until the customer orders NT Enterprise Edition does the NT price exceed that of a Linux system. Similar premiums are charged on other systems. This leads us to question why a "free" OS FIS on a Dell server ends up costing the user more than an OS as (relatively) expensive as Windows NT.

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