1999 Product of the Year: Linux

Linux takes the operating system scene by stormCalling 1999 a breakthrough year for the Linux operating system would be an understatement.

Two years ago, Linux was a technology with a following only among those living on the fringes of the development community; last year the operating system rocketed into the consciousness of mainstream development and user communities alike.

This last year, the Linux community gained unprecedented market share vs. rival Microsoft's Windows NT and other versions of the Unix operating system in the server market, along with a healthy war chest of capital from lavishly successful initial public offerings (IPOs) among a handful of key Linux players. Those funds should ensure that these Linux vendors remain competitive with Microsoft through technical development and strategic acquisitions.

"Linux has become very interesting to a lot of people," says Dan Kusnetsky, program director for operating environments and serverware at International Data Corp. (IDC), a market research company in Framingham, Mass. "We have seen stock prices shoot through the roof. Studies we've done show that once [users] do use it, they like it."

The first monster IPO to take the industry by surprise was the August IPO of Red Hat Software; the company's share value tripled on its first day of availability. Red Hat now has a market value of $16 billion, according to analysts. The company expended about $700 million to buy Cygnus Solutions in November, which was the biggest acquisition within the Linux community to date.

The second blockbuster public offering was that of VA Linux Systems, a maker of servers optimized to run Linux, which set a Wall Street record when its stock jumped nearly 700 percent in value on its first day of trading. Its market cap topped out at an astronomical $7.1 billion.

Other Linux-based companies going public this last year were Cobalt Networks, worth $3.1 billion, and Andover.Net, valued at $712 million at press time.

Among Linux operating systems vendors, market leader Red Hat had several major releases in 1999 of its operating system, including the introduction of its 6.x series, as did Caldera Systems, which is No. 2 in market share behind Red Hat.

Both companies were responsible for Linux's remarkable gain in the mid-range server market in the last two years. IDC reported that Linux gained a 17.2 percent market share of all server shipments in 1998, and the company, among other analysts, predicted that share could rise into the mid-20-percent range for 1999.

Although Linux has not done much to loosen Microsoft's stranglehold on the desktop operating systems market, there is renewed hope even for that space, analysts say. At Fall Comdex in November, Corel released its first version of Linux for the desktop, based on the Debian version of the operating system, which featured perhaps the snazziest interface for Linux to date.

"On the desktop, it seems the interest is largely among researchers and academics," IDC's Kusnetsky says. "We really don't see general interest in consumers yet, except for software developers."

As momentum rapidly grew throughout the year for Linux operating systems, so did that for applications that exploit it. Not only were there new releases of Linux application stalwarts such as the Apache Web Server, but also first-time releases from major players in the enterprise applications arena, including IBM with its DB2, Lotus Notes, and VisualAge programming tools, as well as Oracle's best-selling server database.

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