AOL may be trying on Red Hat: Report

Multimedia giant AOL Time Warner Inc. (AOLTW) is in talks over the possible acquisition of Red Hat Inc., a major distributor of the open-source Linux operating system, The Washington Post reported Saturday.

The negotiations “are still fluid,” the paper said, citing sources familiar with the matter. AOLTW subsidiary America Online Inc. (AOL) is said to be interested in Linux as a possible alternative to the dominant Windows operating systems of its archrival Microsoft Corp.

Officials at AOL, Red Hat, and Microsoft could not be immediately reached. The Post said the companies had declined to comment.

AOL on users’ PCs currently runs on Windows, but it is certainly feasible that its technology could be configured to bypass the Microsoft operating system and run on Red Hat’s Linux instead, said Evan Leibovitch, vice-president of business development at Toronto-based IT services firm Starnix Inc.

“AOL has been at odds with Microsoft (Corp.) over a number of issues and being involved with a Linux company gives [AOL] some very good leverage. Because Linux now has enough applications to become a very good desktop engine, AOL could itself make an Internet browser engine that would include all the AOL software together with office tools such as (Sun Microsystems’) StarOffice and so on, that would do everything that most people would want at a fraction of the cost of the typical Windows system,” said Leibovitch, who is also chairman of the board for the Linux Professional Institute

If such a deal were ever completed, the implications could be a positive or negative for the open-source community, the users or even AOL, said Larry Karnis, president and senior consultant at the Brampton, Ont.-based services company Application Enhancements Inc.

“The reason is that AOL did not do a good job gobbling up Netscape in that it took them (about) two years to open-source the browser and, by that time, they’d basically lost the browser war to Microsoft. And they didn’t really end up doing anything with Netscape’s server software and ended up selling it off to Sun. So in terms of being a good friend of a software development company I’m not sure that AOL has a good track record there,” Karnis said.

Since there is no license for Red Hat’s version of Linux – businesses can buy one copy and legally install it on thousands of machines, Karnis said the only real draw for he could see for AOLTW was “early access to Red Hat’s crown jewels.”

“Red Hat has some configurations that they charge very significant money for. They have clustered versions for high-availability, and they have database versions and these things would be of interest to large companies that have a lot of customers,” he said.

Although it makes sense for an AOLTW-size company to simply snap up a leading Linux company rather than roll its own version from scratch, such an acquisition suggests many other interesting possibilities for the media giant, Leibovitch said.

“It is important to remember that this is not just AOL (the Internet provider), this is also the company that owns Netscape, this is the company that owns CNN and there are a lot of possibilities within the AOLTW group of companies that could offer good mixes for a Linux company. For instance AOLTW has a lot of cable companies in the U.S. This could mean new Linux support for things like high-speed Internet over cable,” Leibovitch said.

With IBM Corp., Compaq Computer Corp., Hewlett-Packard Co. and Dell Computer Corp. all offering various levels of Linux support, AOLTW is far from the first big company to make moves toward Linux, Leibovitch said, but its size and reach present some important differences.

“In a large consumer-oriented company like AOL you could have what might be the first significant move of Linux to the commercial desktop. AOL knows what consumers want, and if it applies those sensibilities to Linux you could absolutely have a Microsoft competitor on the desktop, ” he said.

Karnis also suggested that with Linux’s strength as a base operating system for an appliance – especially given speculation about installing it on PDAs – AOLTW might be looking for an OS to support new types of content delivery hardware.

Based in Durham, N.C. Red Hat was co-founded in 1994 by Hamilton, Ontario native Bob Young to commercialize the free Linux OS kernel. The company has focussed on providing training, tech support, certification, on-site consulting, documentation and priority FTP access to updates.

Red Hat has always been a “very pure” Linux company, maintaining the communal spirit in which Linux was created, Leibovitch said.

“[Red Hat] has not been in any rush to mix commercial applications into the open-source Linux product and it will be very important to see how having new masters at AOL Time Warner would affect that. I’ve already been hearing some concern in the (Linux user) community that pressure from new owners that are not familiar with Linux could lead Red Hat away from that philosophy, but I’ll be cautiously optimistic about it.”

(With files from Rick Perera, IDG News Service)

Red Hat is at

AOL Time Warner is at

Starnix is at

Application Enhancements is at