Red Hat’s Linux Domination Weakens

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Red Hat's Linux Domination Weakens
R. Krause - September 13, 2000

Event Summary

According to recently figures from IDC, Red Hat was still the #1 distributor of the Linux operating system in 1999 by a wide margin, with a 48% share of the copies shipped. Trailing Red Hat were German vendor SuSE with a 15% share, and Caldera Systems and TurboLinux with 10% each. (See Figure 1) Bringing up the rear were MandrakeSoft (4%) and Corel (1%).

Figure 1.

A potential area of concern for Red Hat is the sales growth of its next three competitors. From 1998 to 1999, the Linux market overall grew by 89% (by units shipped), but Red Hat grew "only" 69%. This is in sharp contrast to the growth of SuSE (175%), Caldera (175%), and TurboLinux (450%). (See Figure 2). In addition, July, 2000 retail sales figures (as compiled by PC Data) indicate MandrakeSoft (~32%), Red Hat (25%) and Corel (23%) have grabbed a significant portion of that segment. [Be advised that market share for Linux includes more distribution methods than retail.]

Figure 2.

Market Impact

As with the server hardware market, the Linux market is starting to consolidate. Red Hat is still the clear leader, but the "second three" (SuSE, Caldera, TurboLinux) have closed the gap slightly. Of course, the growth rates of the second three, although tremendous, are unsustainable (unless the Linux market matches those rates). We expect Red Hat to maintain a 40+ % share (using IDC's metrics) of the Linux market through 2001. Although Corel has increased its sales, we still have concerns about its long-term viability, due to its weakened financial position, and organizational turmoil (especially the resignation of CEO Mike Cowpland). We believe MandrakeSoft will still be a presence in Europe, and the July retail figures show it has started to makesignificant inroads in the US retail market.

The "fly in the ointment" is that the market share figures are largely based on the server market. Linux still has only a single-digit market share in the desktop space. When/if Linux gains significant desktop market share (greater than 15%), we expect some shifting of share percentages, as the July 2000 retail sales figures indicate. Based on TEC's analysis (see Caldera eDesktop Edges Out Microsoft Windows 2000 in Functionality), we expect Caldera to challenge Red Hat for desktop market share, although its retail sales indicate otherwise.

[Note: Because of the way IDC calculates units shipped - pre-installed unit sales are not counted presently- we believe the market share figure for Red Hat is actually higher, in the 60%-65% range.]

User Recommendations

The evident consolidation translates into caution for users wishing to make a move to Linux. Although market share is not a guarantor of success, we believe near-zero market share (in a maturing market) is a warning sign, especially if customers want long-term vendor support. For this reason, we recommend larger enterprises stick with one of the top four or five vendors - at least until other vendors grab significant market share. By default, this means potential customers might want to think twice about "betting the company" on Corel Linux. As mentioned earlier, this is primarily due to their financials; if they can turn the numbers around, this will change our recommendation.

As mentioned earlier, TEC's WebTESS software indicates that Caldera's eDesktop functionality may make it a better choice for a desktop OS than Red Hat Linux 6.2, although we believe Red Hat has the edge in service/support. (This does not imply that SuSE or TurboLinux are inferior - merely that they were not rated in the mentioned report.)

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