Red Hat initially won't tackle the entire desktop software market, aiming instead for corporations whose employees need only basic computing features such as word processing and Web access. But the company does have bigger aspirations.
"The ambitions are grand, but the expectations are going to be moderate at the outset," chief executive Matthew Szulik said in an interview. "What we're focused on for the next 12 to 18 months is doing a great job in the enterprise, the government and academic marketplaces." Linux has spread widely in recent years, attaining support from all the biggest server hardware and software companies. But the desktop market will be a tough nut to crack, analysts believe.
"It's the dream and the Holy Grail, but when you compete with Microsoft in this arena, you're going up against Microsoft where they have the greatest strength," said Jupiter Research analyst Michael Gartenberg. "The cost of pulling out Windows and replacing it with something else is relatively high unless [Red Hat] can demonstrate some major productivity gain or tremendous long-term cost savings."
Linux had 2.6 percent of the desktop market compared with 93 percent for Windows in 2002, the most recent year for which figures are available, said analyst Al Gillen of market researcher IDC.
Price comparisons are awkward, given Red Hat's subscription model, but a copy of Microsoft Windows XP Professional retails for $299. Red Hat's top Linux competitor, Novell, sells one desktop product for $90, and a five-pack of a more business-oriented edition for $598. Perhaps closest to Red Hat's approach is that of Sun Microsystems, whose SuSE Linux-based Java Desktop System costs $100 per employee per year (though discounted to $50 through June 2).
For another $10,000, Red Hat will include a copy of the Red Hat Network Satellite Server, which lets a company run centralized administration tasks and customize the delivery of software updates. It also comes with a copy of Red Hat Enterprise Linux for a server, Szulik said.
Microsoft already has surmounted multiple desktop threats, Gartenberg said. "We've gone through this with network computing, browser-based computing, Java-based computing, and now it's Linux."
And when Red Hat guns for the consumer market, it could well find that competitors such as Lindows, Lycoris and Mandrake already have staked out turf.
The long view Red Hat has patience, though, and even predicts that desktop software eventually will bring in more revenue than server software.
"I would say that in five to seven years, the strength of revenue with this relationship with the customer will be on the scale of the server business," Szulik said -- but he cautioned that he believes that world also will arrive when applications run on a tightly coupled combination of desktops and servers.
Szulik said the next desktop operating system transition at Microsoft will be an opportunity to convince customers to make the change to Linux. "A lot of customers are faced with heartburn (from) thinking of that transition from one Microsoft environment to Longhorn, whenever it does make its debut," Szulik said.
Microsoft didn't respond to a request for comment.
Red Hat has partnerships to help ease Linux adoption, including ones with EMC's VMware and with Citrix that could help companies run existing Windows applications more gracefully on Linux computers. VMware pledges support for Red Hat Desktop within 90 days of release, spokeswoman Amber Rowland said.
And the next version, Red Hat Desktop 4, scheduled for release in the first quarter of 2005, will dovetail better with Microsoft's Active Directory software for recording user computer and permission information.
Red Hat is trying to build new desktop technology as well, said desktop project leader Havoc Pennington.
"We have the largest group of desktop engineering leadership in any company involved in the Linux desktop," he said, pointing to developers helping with open-source projects including the OpenOffice competitor to Microsoft Office, the Mozilla Web browser, the GNOME graphical interface and its GTK components and the Freedesktop.org effort for basic graphics support.
Early market: Europe and Asia
Red Hat picked London to make the desktop announcement because "the European and Asian market is ripe" for desktop Linux, Szulik said. A German life insurance company, LVM, has begun a pilot program to test the Red Hat Desktop software and plans to spread it across 8,400 PCs, Red Hat said -- though it's replacing an internally developed version of Linux, not a competitors' product.
The city of Munich in Germany opted for 14,000 Linux desktop computers, and interest is high among governments outside the United States, said Summit Strategies analyst Dwight Davis.
"A good percentage of it is tied to a reluctance to really tie your future as a government to a monolithic US company," Davis said. "Microsoft hasn't done itself any favours by presenting a somewhat arrogant and domineering face to the world through the antitrust trials."
Szulik said in March that Red Hat would begin its desktop foray soon. But the company is in some ways behind its biggest Linux competitor, Novell, which acquired SuSE Linux in January and has some desktop Linux customers.
In March, Novell trumpeted its desktop Linux initiative and announced a deal that lets Hewlett-Packard preinstall Novell's SuSE Linux.
Throughout 2004, Red Hat will work on securing partnerships with computer makers. Red Hat has "no formal commitment at this point," Szulik said, but he predicts deals will come with top PC makers if the company's software is well-received.
Dell, the top PC maker for the moment, was lukewarm about the prospect. "We don't see significant demand from our customers for factory installation of Linux on the desktop, but we'll continue to monitor what customers want, including products from key software partners like Red Hat," spokeswoman Carmen Maverick said.
But HP was more positive. "A key component of HP's Linux strategy is to provide its customers choice, and Red Hat's initiative to support Linux on the desktop aligns with that vision," spokeswoman Elizabeth Phillips said.
